SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
_____________________
For the fiscal year ended Commission file number
December 30, l995 1-4105
BAUSCH & LOMB INCORPORATED
(Exact name of registrant as specified in its charter)
NEW YORK 16-0345235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BAUSCH & LOMB PLACE, ROCHESTER, NEW YORK 14604-2701
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code:(716) 338-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.40 par value New York Stock Exchange
Securities registered pursuant to
Section 12(g) of the Act: None
[Cover page 1 of 2 pages]
<PAGE>
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value (based on the consolidated tape
closing price on February 27, 1996) of the voting stock held by
non-affiliates of the registrant was $2,167,628,290. For the
sole purpose of making this calculation, the term "non-affiliate"
has been interpreted to exclude directors and corporate officers.
Such interpretation is not intended to be, and should not be
construed to be, an admission by Bausch & Lomb Incorporated or
such directors or corporate officers that such directors and
corporate officers are "affiliates" of Bausch & Lomb
Incorporated, as that term is defined under the Securities Act of
1933.
The number of shares of common stock of the registrant,
outstanding as of February 27, 1996 was 56,800,556, consisting of
56,031,154 shares of Common Stock and 769,402 shares of Class B
Stock, which are identical with respect to dividend and
liquidation rights, and vote together as a single class for all
purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II The Bausch & Lomb 1995 Annual Report to
Shareholders for fiscal year ended December 30, 1995 ("Annual
Report"). With the exception of the pages of the Annual Report
specifically incorporated by reference herein, the Annual Report
is not deemed to be filed as a part of this Report on Form 10-K.
Part III Bausch & Lomb Incorporated Proxy Statement, dated
April 11, 1996 ("Proxy Statement"). With the exception of the
pages of the Proxy Statement specifically incorporated by
reference herein, the Proxy Statement is not deemed to be filed
as part of this Report on Form 10-K.
[Cover page 2 of 2 pages]
<PAGE> 1
TABLE OF CONTENTS
PART I PAGE
Item 1. Business ................................ 2
Item 2. Properties .............................. 5
Item 3. Legal Proceedings ....................... 6
Item 4. Submission of Matters to a Vote
of Shareholders ......................... 7
PART II
Item 5. Market for Bausch & Lomb Incorporated's
Common Stock and Related Shareholder
Matters ................................. 8
Item 6. Selected Financial Data ................. 8
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations................ 8
Item 8. Financial Statements and
Supplementary Data ...................... 8
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure ................ 8
PART III
Item 10. Directors and Executive Officers
of Bausch & Lomb Incorporated............ 9
Item 11. Executive Compensation .................. 10
Item 12. Security Ownership of Certain
Beneficial Owners and Management ........ 10
Item 13. Certain Relationships and
Related Transactions .................... 10
PART IV
Item 14. Exhibits, Financial Statement
Schedule, and Reports on Form 8-K ...... 11
Signatures ......................................... 12
Schedules ......................................... S-1
Exhibit Index ..................................... E-1
Exhibits............ (Attached to this Report on Form 10-K)
<PAGE> 2
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Bausch & Lomb Incorporated is a world leader in the
development, manufacture and marketing of products and services
for the healthcare and optics fields.
Bausch & Lomb was incorporated in the State of New York in
1908 to carry on a business which was established in 1853. Its
principal executive offices are located in Rochester, New York.
Unless the context indicates otherwise, the terms "Bausch & Lomb"
and "Company" as used herein refer to Bausch & Lomb Incorporated
and its consolidated subsidiaries. Highlights of the general
development of the business of Bausch & Lomb during 1995 are
discussed below.
The Company experienced a second difficult year in 1995;
however, the management of the Company is committed to improving
financial performance as outlined in its three-year strategic
plan. Sales increased to $1,932.9 million, 2% above the 1994
amount of $1,892.7 million. Excluding revenues for a sports
optics business that was divested in 1995, sales from continuing
product lines reached $1,914.6 million, a gain of 7% over the
1994 amount of $1,781.7 million. Net earnings for 1995 amounted
to $112.0 million or $1.94 per share compared to the amounts of
$31.1 million or $.52 per share in 1994. Results for both
periods were impacted by costs for restructuring and goodwill
impairment charges as described below. The 1995 amounts also
include a gain on the sale of the sports optics business. Net
earnings were $108.6 million or $1.88 per share in 1995,
excluding restructuring charges and the gain on the sports optics
divestiture, compared to $106.1 million or $1.78 per share in
1994, excluding goodwill impairment charges.
In May 1995, the Company sold its Sports Optics Division to
Worldwide Sports & Recreation, Inc., an affiliate of Pexco
Holdings. Total consideration included approximately $78 million
in cash paid at closing, plus future payments and securities of
Worldwide Sports & Recreation, Inc. The Sports Optics Division
marketed a full line of binoculars, riflescopes, telescopes,
spotting scopes and sporting glasses under well-known brand names
including Bushnell, Jason and Bausch & Lomb. The Company
recorded a non-recurring gain of $20.8 million after taxes, or
$.36 per share, on the sale.
In July 1995, the Company announced a commitment of more
than $30 million to install the next generation of soft contact
lens manufacturing technology. This capital investment for new
equipment follows the successful completion of the first phase of
a joint development program with IBM for systems design and
prototype production. The new technology will significantly
reduce the unit manufacturing cost of the Company's soft contact
lens products and substantially increase its contact lens unit
production capacity. The new technology will initially be used
to make its new high-water frequent replacement product,
SofLens66.
In December 1995, the Company announced that Daniel E. Gill,
chairman and chief executive officer, elected to retire from the
Company. Mr. Gill served as chairman and chief executive officer
for 13 years and had 17 years of service with the Company. Mr.
Gill also retired from the Company's Board of Directors.
Concurrent with this announcement, the Company named William M.
Carpenter president and chief operating officer. Mr. Carpenter
joined the Company in March 1995 as executive vice president and
global business manager - eyewear. William H. Waltrip, an
outside director of the Company, was named chairman and chief
executive officer in January 1996. Mr. Waltrip is chairman of
Technology Solutions Company and has been a director of the
Company since 1985.
In January 1996, the Company announced it had restated its
1993 and 1994 financial results. The action was taken as a
result of an ongoing investigation which identified uncertainties
surrounding the execution of a 1993 fourth quarter contact lens
sales program and the improper recording of 1993 sunglass sales
in Southeast Asia. Restatement of the contact lens distributor
program reduced Bausch & Lomb's originally reported 1993 sales
and net income by $22.3 million and $11.0 million, respectively,
while reversal of the sunglass sales in the Southeast Asia region
reduced previously reported 1993 sales by $19.8 million and net
income by $6.6 million. In total, this restatement reduced 1993
earnings per share by $.29. The restatement increased the
Company's reported 1994 sales and net income by corresponding
amounts, but had no effect whatsoever on the Company's 1995
financial results.
<PAGE> 3
In December 1995, the Board of Directors approved certain
restructuring actions and the Company recorded certain charges
affecting 1995 results. The Company recorded a $26.7 million
restructuring provision, reducing net earnings by $.30 per share,
to cover actions being taken to enhance future financial
performance. More than half of the reserve, approximately $16
million, relates to severance and plant closure costs associated
with a reconfiguration of manufacturing processes, plus some
consolidation of administrative functions, in the Company's
eyewear business. The remainder stems from a partial
consolidation of various administration and production activities
for the Company's Charles River Laboratories subsidiary; losses
on disposition of assets related to elective strategy changes in
the traditional contact lens business; costs related to the
elimination of approximately 35 corporate staff positions; and
the sale of a Company airplane.
The Company also reduced 1995 earnings for litigation
provisions of $14.2 million or $.24 per share after taxes and the
recognition of retirement and other benefits for former chairman
and chief executive officer, Daniel E. Gill, amounting to $4.4
million or $.08 per share after taxes.
In January 1996, the Company entered into an agreement to
acquire Arnet Optic Illusions, Inc., a designer, manufacturer and
marketer of high-performance sunglasses and goggles, which
competes in market segments with specialty products where the
Company is not currently represented.
In February 1996, the Company acquired Award plc, a
Scotland-based company which manufactures and markets a high-
water, daily disposable soft contact lens. The Company also
acquired worldwide rights to patents held by BTG plc, a
technology transfer company, for methods used in Award's
manufacturing process. The patented cast-mold manufacturing
technology and highly efficient distribution process used by
Award are specifically designed to respond to the high volumes,
short cycle times and low unit costs needed to make single-use
contact lens wear practical and affordable for consumers.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information concerning sales, business segment earnings and
identifiable assets attributable to each of Bausch & Lomb's
reportable industry segments is set forth on pages 28-33 and 50-
51 of the Annual Report which are incorporated herein by
reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Bausch & Lomb's operations have been classified into two
industry segments: Healthcare and Optics. Below is a
description of each segment and information to the extent that it
is material to an understanding of the Company's business taken
as a whole. In addition, pages 18-26 of the Annual Report are
incorporated herein by reference.
Healthcare
The Healthcare segment includes personal health, medical and
biomedical products. In the personal health sector, major lines
include solutions used for the care of contact lenses and for the
relief of eye irritation, contact lens accessories, certain over-
the-counter pharmaceutical products, oral care products and Curel
and Soft Sense skin care products. Medical products include
contact lenses and lens materials, prescription drugs, hearing
aids and dental implants. Biomedical products include purpose-
bred laboratory animals for biomedical research, products derived
from specific pathogen-free eggs and a variety of other
biotechnical and professional services provided to the scientific
research community.
The Company markets its personal health products in the U.S.
to practitioners through its own sales force and through drug
stores, food stores and mass merchandisers. Personal health
products are also marketed through an extensive international
marketing organization. Distribution in many other countries is
accomplished through distributors or dealers. Medical products
are marketed through the Company's sales force and distributors
to eye care and dental care practitioners, independent optical
laboratories and hospitals. Hearing aids are distributed through
the Miracle-Ear franchise system. Sales to pharmacies are
handled by drug wholesalers, while marketing of medical products
outside the U.S. is accomplished through the Company's extensive
international marketing organization. In some countries,
distribution is handled through dealers or distributors.
Biomedical products are sold primarily through the Company's
sales force worldwide.
<PAGE> 4
Optics
The principal products of the Company's Optics segment
include sunglasses and optical thin film services and products.
Optical products are distributed worldwide through
distributors, wholesalers, manufacturer's representatives, and
independent sales representatives. These products are also
distributed through the Company's sales force to optical stores,
department stores, catalog showrooms, mass merchandisers,
sporting goods stores and, in the case of optical thin films, to
a variety of industrial customers.
Raw Materials and Parts; Customers
Materials and components in both of the Company's industry
segments are purchased from a wide variety of suppliers and the
loss of any one supplier would not adversely affect the Company's
business to a significant extent. No material part of the
Company's business taken as a whole is dependent upon a single or
a few customers in either of its industry segments. However, in
the Optics segment, 15% of sales are attributable to Sunglass
Hut.
Patents, Trademarks & Licenses
While in the aggregate the Company's patents are of material
importance to its businesses taken as a whole, no single patent
or patent license or group of patents or patent licenses relating
to any particular product or process is material to either
industry segment. The Company actively pursues technology
development and acquisition as a means to enhance its competitive
position in its business segments.
In the healthcare segment, Bausch & Lomb has developed
significant consumer, eye care professional and dental care
professional recognition of products sold under the Bausch &
Lomb, Sensitive Eyes, ReNu, Boston, SeeQuence, Medalist, The
Boston Lens, Optima, SofLens, Charles River, VAF/Plus, Dr. Mann
and Interplak trademarks. Bausch & Lomb, Ray-Ban, Revo and
Wayfarer are trademarks receiving substantial consumer
recognition in the optics segment.
Seasonality and Working Capital
Some seasonality exists for the Interplak line of power
toothbrushes in the Healthcare segment and for sunglasses in the
Optics segment. During some periods, the accumulation of
inventories of such products in advance of expected shipments
reflects the seasonal nature of the products. In general, the
working capital practices followed in each of the Company's
industry segments are typical of those businesses.
Competition
Each industry is highly competitive in both U.S. and non-
U.S. markets. In both of its segments, Bausch & Lomb competes on
the basis of product performance, quality, technology, price,
service, warranty and reliability. In the Optics segment, the
Company also competes on the basis of style.
Research and Development
Research and development constitutes an important part of
Bausch & Lomb's activities. In 1995, the Company's research and
development expenditures totaled $66 million, as compared to $60
million in 1994 and $58 million in 1993.
Environment
Although Bausch & Lomb is unable to predict what legislation
or regulations may be adopted or enacted in the future with
respect to environmental protection and waste disposal, existing
legislation and regulations have had no material adverse effect
on its capital expenditures, earnings or competitive position.
Capital expenditures for property, plant and equipment for
environmental control facilities were not material during 1995
and are not anticipated to be material in 1996 or 1997.
Number of Employees
Bausch & Lomb employed approximately 14,000 persons as of
December 30, 1995.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Information as to sales, operating earnings and identifiable
assets attributable to each of Bausch & Lomb's geographic
regions, and the amount of export sales in the aggregate, is set
forth on page 50 of the Annual Report and is incorporated herein
by reference.
<PAGE> 5
ITEM 2. PROPERTIES
The principal manufacturing, distribution and production
facilities and other important physical properties of Bausch &
Lomb at March 1, 1996 are listed hereafter and grouped under the
principal industry segment to which they relate. Certain
properties relate to more than one industry segment. Except
where otherwise indicated by footnote, all properties shown are
held in fee and are not subject to major encumbrances.
HEALTHCARE
Manufacturing Plants Distribution Centers
Yorba Linda, CA (2) Yorba Linda, CA (2)
Sarasota, FL (1) Preston, CT (2)
Tampa, FL Tampa, FL
Wilmington, MA (2) Wilmington, MA (2)
Golden Valley, MN (1) Golden Valley, MN (1)
Rochester, NY (1),(2) Reinholds, PA (2)
(Optics Center) Greenville, SC (2)
Greenville, SC Lynchburg, VA (2)
North Ryde, Australia (2) Livingston, Scotland (2)
Porto Alegre, Brazil
Kitchener, Ontario,
Canada (2)
Beijing, China (2)
Berlin, Germany
Bhiwadi, India
Waterford, Ireland (2)
Milan, Italy
Umsong-Gun (Seoul), Korea
Livingston, Scotland (2)
Barcelona, Spain
Madrid, Spain
Hastings, United Kingdom
Production Facilities
Hollister, CA (2) Brussels, Belgium
Lebanon, CT St. Constant, Canada
Preston, CT Margate, England
Storrs, CT Regis Bognor, England (2)
Voluntown, CT Lyons, France
Summerland Key, FL (2) St. Aubin-les Elbeuf, France
Colbert, GA (2) Extertal, Germany
Roanoke, IL (2) Kisslegg, Germany
Windham, ME Sulzfeld, Germany
Southbridge, MA (2) Calco, Italy
West Brookfield, MA (2) Atsugi, Japan
Wilmington, MA Hino, Japan
Portage, MI Tskuba, Japan (2)
O'Fallon, MO Someren, Netherlands
Raleigh, NC Barcelona, Spain (2)
Hampton, NH (2) Uppsala, Sweden (2)
Pittsfield, NH
Newfield (Lakeview), NJ
Stone Ridge (Kingston), NY
Charleston, SC (2)
Oregon, WI
<PAGE> 6
OPTICS
Manufacturing Plants Distribution Centers
Sunnyvale, CA (2) Sunnyvale, CA (2)
Oakland, MD San Clemente, CA (2)
Rochester, NY (1),(2) Rochester, NY (1),(2)
(Optics Center) (Optics Center)
Rochester, NY San Antonio, TX
(Frame Center) Richmond Hill, Ontario,
San Antonio, TX Canada (2)
North Ryde, Australia (2)
Guangzhou, China (2)
New Territories, Hong Kong (2)
Bhiwadi, India (2)
Waterford, Ireland (2)
Nuevo Laredo, Mexico (2)
CORPORATE FACILITIES
Rochester, NY
One Bausch & Lomb Place (2)
Optics Center (1),(2)
1295 Scottsville Road (2)
(1) This facility is financed under a tax-exempt financing
agreement.
(2) This facility is leased.
Bausch & Lomb considers that its facilities are suitable and
adequate for the operations involved. All facilities are being
productively utilized.
ITEM 3. LEGAL PROCEEDINGS
1. In June 1994, five separate shareholder actions against the
Company and its former Chief Executive Officer and Chairman,
Daniel E. Gill, were filed in the Western and Southern Districts
of New York and an additional action, naming the Company, Mr.
Gill and four other officers was filed in January 1995. In
September 1995, the parties agreed to consolidate the actions and
plaintiffs have filed several amended complaints. Plaintiffs
seek to represent two classes, including all persons who
purchased stock during a nine-month period prior to a June 3,
1994 announcement that the Company was undertaking efforts to re-
balance distributor inventories and shareholders who purchased
shares between June 4, 1994, and January 25, 1995, alleging that
the Company artificially inflated the value of its stock by
making false and misleading statements about expected financial
results. The Company is vigorously defending itself against
these claims.
2. On December 28, 1994, following an article in Business Week
magazine questioning the Company's accounting treatment of a
fourth quarter 1993 sales program initiated by the Contact Lens
Division, the Company received a request from the Securities and
Exchange Commission (SEC) for information in connection with an
inquiry being conducted by the SEC. Since then, the Company has
received additional requests for information from the SEC staff,
including those with respect to the Company's global eyewear
business. The Company has provided documents and Company
personnel have testified. The Company is cooperating with the
SEC's continuing investigation and is unable to predict the
outcome of this proceeding.
3. In November 1994, the United States District Court for the
Northern District of Alabama certified a nationwide class of
purchasers of Optima FW and Medalist lenses during the period
January 1, 1991 through November 1, 1994 to pursue claims
relating to the Company's marketing and sale of the Optima FW,
Medalist and SeeQuence2 contact lens systems. Plaintiffs allege
that the Company misled consumers by packaging the same lens
under three different names for three different prices.
Plaintiffs seek compensatory and punitive damages in an
unspecified amount. A trial is likely in the first half of 1996.
Another action raising substantially similar claims and filed in
California state court in October 1994 has been stayed pending
the trial of this action. A working group of state attorneys
general, representing the interests of 18 states, also requested
documents regarding the Company's pricing, labeling and
advertising of Optima FW, Medalist and SeeQuence2 lenses. The
State of Florida has indicated that it will pursue an
investigation independent of the working group and has served a
subpoena seeking documents relating to the marketing and sale of
contact lenses and contact lens solutions. The Company continues
to vigorously defend the marketing of these lens systems.
<PAGE> 7
4. In May and June 1995, the Company was served with several
proposed class action complaints in New York, New Jersey,
Pennsylvania and California, alleging that the Company misled
consumers in its marketing and sale of Sensitive Eyes Rewetting
Drops and Saline Solution and Bausch & Lomb Eyewash. Pending a
motion to certify a class in the New York action, the other
actions were stayed. The Company stipulated to certification of
a nationwide class of purchasers of Sensitive Eyes Rewetting
Drops, Boston Rewetting Drops, ReNu Rewetting Drops and Bausch &
Lomb Eyewash between May 1, 1989 and June 30, 1995 in the New
York action. In exchange plaintiffs agreed to seek dismissal of
their actions in other states. Another action, which was filed
by a separate group of plaintiffs' attorneys in state court in
California, was stayed by the court pending further review. The
Company vigorously defends the marketing of these products.
5. In June 1994, the Florida Attorney General, acting on behalf
of disposable contact lens consumers in the State of Florida,
filed an antitrust action against the Company and others in the
United States District Court for the Middle District of Florida.
The complaint challenges the Company's long-standing policy of
selling contact lenses only to licensed professionals.
Plaintiffs allege that the policy was adopted in conspiracy with
others to eliminate alternative channels of trade from the
disposable lens market. The Florida Attorney General seeks
treble damages on behalf of all purchasers of contact lenses,
whether from the Company or others, a $1 million penalty and
injunctive relief. A number of consumer class actions have been
consolidated in the Middle District of Florida and actions are
pending in California, Alabama and Tennessee state courts. The
complaints make similar allegations and seek similar relief on
behalf of consumers outside the State of Florida. The Company
defends its policy as a lawfully adopted means of insuring
effective distribution of its products and safeguarding
consumers' health.
6. In 1995, the Company established additional provisions for,
among other things, the costs and expenses associated with
certain litigation against the Company. One of the matters
related to litigation arising from the marketing and sale of
Miracle-Ear hearing aids manufactured and sold by the Company's
Dahlberg Inc. subsidiary between January 1989 and January 1994.
In November 1995, settlements of class actions in Minnesota and
Alabama and an action by the FTC were approved. The provision
balance is deemed adequate to satisfy the settlements in these
matters as well as the costs and expenses reasonably estimable
with regard to the other pending matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
Inapplicable.
<PAGE> 8
PART II
ITEM 5. MARKET FOR BAUSCH & LOMB INCORPORATED'S COMMON
STOCK AND RELATED SHAREHOLDER MATTERS
The sections entitled "Dividends" and "Quarterly Stock
Prices" and table entitled "Selected Financial Data" on pages
41, 42 and 66-67, respectively, of the Annual Report are
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" on pages 66-67,
of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The section entitled "Financial Review" on pages 28-42 of
the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, including the notes thereto,
together with the sections entitled "Report of Independent
Accountants" and "Quarterly Results" of the Annual Report
included on pages 43-65 and 42, respectively, are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
<PAGE> 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
BAUSCH & LOMB INCORPORATED
Information with respect to non-officer directors is
included in the Proxy Statement on pages 3-6, and such
information is incorporated herein by reference. Set forth below
are the names, ages (as of March 1, 1996), positions and offices
held by, and a brief account of the business experience during
the past five years of, each executive officer.
Name and Age Position
William H. Waltrip (58) Chairman and Chief Executive Officer
since January 1996; Chairman of Technology Solutions Company
since 1993; Chief Executive Officer, Technology Solutions Company
(1993-1995); Chairman and Chief Executive Officer of Biggers
Brothers, Inc. (1991-1993); Consultant to private industry (1988-
1991).
William M. Carpenter (43) President and Chief Operating Officer
since December 1995; Executive Vice President, Global Business
Manager, Eyewear since March 1995; President and Chief Executive
Officer, Reckitt and Colman, Inc. (1994-1995); President and
Chief Operating Officer, Reckitt and Colman, Inc. (1992-1994);
President, Household Products Division, Reckitt and Colman, Inc.
(1991-1992).
Daniel E. Gill (59) (Retirement Date January 31, 1996)
Chairman since 1982, Chief Executive Officer since 1981 and
Director since l978.
James C. Foster (45) Senior Vice President since December
1994 and President and Chief Executive Officer of Charles River
Laboratories, Inc., a subsidiary of the Company, since 1991; Vice
President (1991-1994); Executive Vice President, Charles River
Laboratories, Inc. (1989-1991).
Stephen A. Hellrung (48) Senior Vice President since March 1995;
Secretary since December 1994; Vice President and General Counsel
(1985-1994).
Jay T. Holmes (53) (Retirement Date May 10, 1996) Executive Vice
President since March 1995 and Chief Administrative Officer since
December 1994; Senior Vice President (1983-March 1995); Corporate
Affairs (1983-1994); Secretary (1981-1994); Director since 1986.
James E. Kanaley (54) Senior Vice President since 1985 and
President, Personal Products Division; Global Business Manager,
Lens Care Products since December 1994; President, Personal
Products Division (1987-1994).
Alex Kumar (48) Senior Vice President, International
Operations since December 1994; Vice President (1989-1994);
President, Europe, Middle East and Africa Division (1989-1994).
Stephen C. McCluski (43) Senior Vice President, Finance since
February 1995; Vice President and Controller (1994); President,
Outlook Eyewear Company (1992-February 1994); Vice President,
Controller, Eyewear Division (1989-1992).
<PAGE> 10
Robert J. Palmisano (51) (Resignation Date November 3, 1995)
Senior Vice President since 1992 and President, Eyewear Division
since 1988; Vice President (1984-1992).
Thomas M. Riedhammer (47) Senior Vice President, Worldwide
Pharmaceutical, Surgical, and Hearing Care Products since
December 1994; Vice President (1993-1994); President, Worldwide
Pharmaceuticals (1994); President, Pharmaceutical Division (1992-
1993); Vice President, Research and Development, Pharmaceutical
Division (1991-1992); Vice President, Paco Pharmaceutical
Services, Inc., and President, Paco Research Corporation (1986-
1991).
Carl E. Sassano (46) Senior Vice President since 1992 and
President, Contact Lens Division since September 1994; Global
Business Manager, Contact Lens Products since December 1994; Vice
President (1986-1992); President, Polymer Technology Corporation,
a subsidiary of the Company (1983-1992).
Deborah K. Smith (48) Senior Vice President, Human Resources
since April 1995; Corporate Vice President, Global Human
Resources Initiatives, Xerox Corporation (1994-1995); Vice
President, Human Resources and Support Services, Development and
Manufacturing Group and Corporate Strategic Services, Xerox
Corporation (1988-1994).
Franklin T. Jepson (48) Vice President, Communications and
Investor Relations since 1986.
Jurij Z. Kushner (45) Vice President and Controller since
February 1995; Vice President, Operations, Personal Products
Division (1994-1995); Vice President and Controller, Personal
Products Division (1992-1994); Staff Vice President, Financial
Planning and Analysis (1986-1992).
James C. Foster is the son of Henry L. Foster, a Senior Vice
President of the Company. All officers serve on a year-to-year
basis through the day of the annual meeting of shareholders of
the Company, and there is no arrangement or understanding between
any of the officers of the Company and any other persons pursuant
to which such officer was selected as an officer.
ITEM 11. EXECUTIVE COMPENSATION
The portions of the "Executive Compensation" section
entitled "Report of the Committee on Management", "Compensation
Tables" and "Defined Benefit Retirement Plans", the second
through fourth paragraphs of the section entitled "Board of
Directors", and the second paragraph of the section entitled
"Related Transactions and Employment Contracts" included in the
Proxy Statement on pages 9-18, 1-2, 18, respectively, are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement on pages
7-8 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The first paragraph of the section entitled "Related
Transactions and Employment Contracts" and
the section entitled "Employment Contracts, Termination of
Employment and Change of Control Arrangements" on pages 18-19 of
the Proxy Statement are incorporated herein by reference.
<PAGE> 11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents or the portions thereof indicated
are filed as a part of this report.
(a) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES COVERED BY REPORTS OF INDEPENDENT ACCOUNTANTS.
1. Data incorporated by reference in Page in
Item 8 from the Annual Report Annual Report
Report of Independent Accountants 65
Balance Sheet at December 30, 1995
and December 31, 1994 44
For the years ended December 30, 1995,
December 31, 1994 and December 25, 1993:
Statement of Earnings 43
Statement of Cash Flows 45
Notes to Financial Statements 46-64
2. Filed herewith
Report of Independent Accountants
on Financial Statement Schedules Exhibit (24)
For the years ended December 30, 1995,
December 31, 1994 and December 25,
1993:
SCHEDULE II- Valuation and Qualifying Page S-1
Accounts
All other schedules have been omitted because the required
information is not present or not present in amounts sufficient
to require submission of the schedule, or because the information
required is included in the consolidated financial statements or
the notes thereto.
(b) REPORTS ON FORM 8-K
Inapplicable.
(c) ITEM 601 EXHIBITS
Those exhibits required to be filed by Item 601 of
Regulation S-K are listed in the Exhibit Index immediately
preceding the exhibits filed herewith and such listing is
incorporated herein by reference. Each of Exhibits (10)-a
through (10)-z is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this form
pursuant to Item 14(c) of this report.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BAUSCH & LOMB INCORPORATED
Date: March 28, 1996 By:/s/William H. Waltrip
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Principal Executive Officer
Date: March 28, 1996 By:/s/William H. Waltrip
William H. Waltrip
Chairman,
Chief Executive Officer
and Director
Principal Financial Officer
Date: March 28, 1996 By:/s/ Stephen C. McCluski
Stephen C. McCluski
Senior Vice President,
Finance
Controller
Date: March 28, 1996 By:/s/ Jurij Z. Kushner
Jurij Z. Kushner,
Vice President and Controller
Directors
Franklin E. Agnew
William Balderston III
Bradford R. Boss
Jay T. Holmes
Ruth R. McMullin
John R. Purcell
Linda Johnson Rice
Alvin W. Trivelpiece
William H. Waltrip
Kenneth L. Wolfe
Date: March 28, 1996 By:/s/Jay T. Holmes
Jay T. Holmes
Attorney-in-Fact and
Director
<PAGE> S-1
<TABLE>
Bausch & Lomb Incorporated
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Reserves for
Doubtful Accounts
(Dollar amounts December 30, December 31, December 25,
in thousands) 1995 1994* 1993*
_____________________________________________________________
<S> <C> <C> <C>
Balance at $ 16,830 $ 13,753 $ 11,834
beginning of year
Activity for the year:
Provision charged 8,253 8,007 4,220
to income
(Reductions)/ (821) 1,769 1,224
additions resulting
from (divestiture)/
acquisition activity
Accounts written (10,194) (7,696) (4,418)
off
Recoveries on 634 997 893
accounts previ-
ously written
off
Reclassifi- (3,470) -- --
cations<F1>
Balance at end $ 11,232 $ 16,830 $ 13,753
of year
*Results have been restated as more fully described in Note 2 -
"Restatement of Financial Information".
<FN>
<F1> Represents reserves related to trade receivables which have
been reclassified to Notes Receivable.
</FN>
</TABLE>
<PAGE> E-1
EXHIBIT INDEX
S-K Item 601 No. Document
(3)-a Certificate of Incorporation of Bausch & Lomb
Incorporated (filed as Exhibit (3)-a to the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 1985,
File No. 1-4105, and incorporated herein by reference).
(3)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-b to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988,
File No. 1-4105, and incorporated herein by reference).
(3)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (3)-c to the Company's Annual
report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(3)-d By-Laws of Bausch & Lomb Incorporated, as
amended, effective October 28, 1986 (filed as Exhibit (3)-b to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1986, File No. 1-4105, and incorporated herein
by reference).
(4)-a Certificate of Incorporation of Bausch & Lomb
Incorporated (filed as Exhibit (4)-a to the Company's Annual
Report on Form 10-K for the fiscal year ended December 29, 1985,
File No. 1-4105, and incorporated herein by reference).
(4)-b Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-b to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988,
File No. 1-4105, and incorporated herein by reference).
(4)-c Certificate of Amendment of Bausch & Lomb
Incorporated (filed as Exhibit (4)-c to the Company's Annual
report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(4)-d Form of Indenture, dated as of September 1,
1991, between the Company and Citibank, N.A., as Trustee, with
respect to the Company's Medium-Term Notes (filed as Exhibit 4-
(a) to the Company's Registration Statement on Form S-3, File No.
33-42858, and incorporated herein by reference).
(4)-e Rights Agreement between the Company and The
First National Bank of Boston, as successor to Chase Lincoln
First Bank, N.A. (filed as Exhibit 1 to the Company's Current
Report on Form 8-K dated July 25, 1988, File No. 1-4105, and
incorporated herein by reference).
(4)-f Amendment to the Rights Agreement between the
Company and The First National Bank of Boston, as successor to
Chase Lincoln First Bank, N.A. (filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated July 31, 1990, File
No. 1-4105, and incorporated herein by reference).
(10)-a Change of Control Employment Agreement with
certain executive officers of the Company (filed as Exhibit (10)-
a to the Company's Annual Report on Form 10-K for the fiscal year
ended December 29, 1990, File No. 1-4105, and incorporated herein
by reference).
(10)-b The Bausch & Lomb Incorporated Executive
Incentive Compensation Plan (filed as Exhibit (10)-b to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-c Amendment to the Bausch & Lomb Incorporated
Executive Incentive Compensation Plan (filed herewith).
(10)-d The Bausch & Lomb Supplemental Retirement
Income Plan I, as restated (filed as Exhibit (10)-e to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
<PAGE> E-2
(10)-e The Bausch & Lomb Supplemental Retirement
Income Plan II, as restated (filed as Exhibit (10)-f to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-f The Bausch & Lomb Supplemental Retirement
Income Plan III (filed as Exhibit (10)-g to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1992,
File No. 1-4105, and incorporated herein by reference).
(10)-g The Bausch & Lomb Incorporated Long Term
Incentive Program, as restated (filed as Exhibit (10)-g to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1985, File No. 1-4105, and incorporated herein by
reference).
(10)-h Amendment to the Bausch & Lomb Incorporated
Long Term Incentive Program (filed as Exhibit (10)-i to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
(10)-i The Bausch & Lomb Incorporated Management
Executive Incentive Plan (filed as Exhibit (10)-h to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-j Amendment to the Bausch & Lomb Incorporated
Management Executive Incentive Plan (filed herewith).
(10)-k The Bausch & Lomb Supplemental Management
Executive Incentive Plan (filed as Exhibit (10)-i to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-l Amendment to the Bausch & Lomb Supplemental
Management Executive Incentive Plan (filed herewith).
(10)-m The Bausch & Lomb Incorporated Long Term
Performance Stock Plan I (filed as Exhibit (10)-j to the
Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1994, File No. 1-4105, and incorporated herein by
reference).
(10)-n Bausch & Lomb Incorporated Long Term
Performance Stock Plan II, as amended (filed as Exhibit (10)-i to
the Company's Annual Report on Form 10-K for fiscal year ended
December 25, 1993, File No. 1-4105 and incorporated herein by
reference).
(10)-o The 1982 Stock Incentive Plan of Bausch &
Lomb Incorporated (filed as Exhibit III-F to the Company's Annual
Report on Form 10-K for the fiscal year ended December 26, 1982,
File No. 1-4105, and incorporated herein by reference).
(10)-p Amendment to the 1982 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-l to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
(10)-q Amendment to the 1982 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-k to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-r The 1987 Stock Incentive Plan of Bausch &
Lomb Incorporated (filed as Exhibit I.B to the Company's
Registration Statement on Form S-8, File No. 33-15439, and
incorporated herein by reference).
(10)-s Amendment to the 1987 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-n to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, File No. 1-4105, and incorporated herein by
reference).
<PAGE> E-3
(10)-t Amendment to the 1987 Stock Incentive Plan of
Bausch & Lomb Incorporated (filed as Exhibit (10)-n to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-u The 1990 Stock Incentive Plan of Bausch &
Lomb Incorporated, as amended (filed as Exhibit (10)-o to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-v The Bausch & Lomb Incorporated Director
Deferred Compensation Plan, as restated (filed as Exhibit (10)-p
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, File No. 1-4105, and incorporated herein
by reference).
(10)-w The Bausch & Lomb Incorporated Executive
Deferred Compensation Plan, as restated (filed as Exhibit (10)-q
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, File No. 1-4105, and incorporated herein
by reference).
(10)-x The Bausch & Lomb Incorporated Executive
Benefit Plan, as amended (filed as Exhibit (10)-t to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 29, 1990, File No. 1-4105, and incorporated herein by
reference).
(10)-y The Bausch & Lomb Incorporated Executive
Security Program (filed as Exhibit (10)-s to the Company's Annual
Report on Form 10-K for the fiscal year ended December 30, 1989,
File No. 1-4105, and incorporated herein by reference).
(10)-z The Bausch & Lomb Retirement Benefit
Restoration Plan (filed as Exhibit (10)-t to the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1991,
File No. 1-4105, and incorporated herein by reference).
(11) Statement Regarding Computation of Per Share
Earnings (filed herewith).
(12) Statement Regarding Computation of Ratio of
Earnings to Fixed Charges (filed herewith).
(13) The Bausch & Lomb 1994 Annual Report to
Shareholders for the fiscal year ended December 31, 1994 (filed
herewith). With the exception of the pages of the Annual Report
specifically incorporated by reference herein, the Annual Report
is not deemed to be filed as a part of this Report on Form 10-K.
(22) Subsidiaries (filed herewith).
(24) Report of Independent Accountants on
Financial Statement Schedules and Consent of Independent
Accountants (filed herewith).
(25) Power of attorney with respect to the signatures of directors
in this Report on Form 10-K (filed herewith).
(27) Financial Data Schedule (filed herewith).
EXHIBIT (10)-c
THE EXECUTIVE INCENTIVE COMPENSATION PLAN
As amended and restated 2/27/96
1.0 INTRODUCTION
The Executive Incentive Compensation Plan is established to
provide incentive compensation in the form of a supplement
to the base salaries of those officers, managers, and key
employees who contribute significantly to the growth and
success of the Company's business; to attract and to retain,
in the employ of the Company, individuals of outstanding
ability; and to align the interests of those who hold
positions of major responsibility in the Company with the
interests of the Company's shareholders.
2.0 ELIGIBILITY
Those members of the executive management group whose duties
and responsibilities contribute significantly to the growth
and success of the Company's business are eligible. This
generally includes all positions in the mid-
management/technical band and above, in Rochester based
divisions or functions. The plan may be adopted by non-
Rochester based divisions.
The participant must be on the payroll in an eligible
position before July 1 of the plan year, to be eligible for
an award.
3.0 DEFINITIONS
3.1 A standard incentive award has been established
for each salary grade or job band and is
expressed as a percentage of period salary
(i.e., eligible base salary earnings for the
year). Exhibit I defines standard percentage
schedules.
The standard incentive award is the award payout
level which over time, participants, units and
the corporation should average, and will be the
amount which will be used for financial accrual
purposes during the incentive year.
3.2 An approved incentive award is the incentive
which has been approved by the Chairman of the
Board of directors and the Committee On
Management of the Board to be paid by the
Company to the participant.
Actual incentive award amounts, based upon
individual and organizational performance, can
vary from 0% for unacceptable performance to a
maximum of 175% of standard. In any event, an
award cannot exceed the maximum.
4.0 MEASURES OF PERFORMANCE
Each organizational unit and eligible participant will set
performance measures. These will be applied for incentive
plan purposes as follows:
<TABLE>
<CAPTION>
Global
Corporation Business Unit(s) Individual
<S> <C> <C> <C> <C>
Global Business 20% 40% 40%
Managers
Staff Officers 75% 25%
Corporate Staff
Participants 50% 50%
Division or Group
Presidents 25% or 25% 75%
Division or
Global Business
Participants 50% or 50% 50%
</TABLE>
4.1 The "Organizational Performance Management
System" (OPMS) has been established to evaluate
corporate, division, global business and profit
center performance for Executive Incentive
Compensation Plan purposes.
The OPMS is based upon five organizational
objectives. These objectives are to be agreed
upon at the beginning of the plan year. They
must include the following categories and
weightings:
Sales 25%
Operating Earnings 25%
Asset Management 20%
Long Term Vitality 15%
How Goals are Achieved 15%
For the three financial goals performance levels
for 5, 4, 3, 2 and 1 ratings are to be defined
at the beginning of the plan year for each goal.
The fourth and fifth goal will be assessed at
year end by the COO and the CEO.
After calculation of year end OPMS results, the
CEO may make a modification of +20 (if
performance is not accurately reflected in
performance measures i.e., due to general
economic, industry change, corporate strategy
change). Adjustments must be made in 5%
increments.
4.2 The "Individual Performance Management System"
(IPMS) for use with the Executive Incentive Plan
will consist of five or fewer specific
individual objectives. These objectives are to
be agreed upon at the beginning of the Plan
year. They must be measurable and generally
within the participant's control. Further,
there will be a pre-determined weighting among
the objectives reflecting the priority of these
objectives. Individual performance will be
determined by the participants' supervisor and
approved by the Division/Group Presidents or
appropriate corporate staff function head.
The unit or functional officer may make an
adjustment of +20% to the calculated ratings if
performance is not accurately reflected in
performance measures. Adjustments must be made
in 5% increments.
5.0 DEFINITION OF PERFORMANCE
The following "definitions of performance" are to be
utilized for the plan:
<TABLE>
<CAPTION>
PERFORMANCE
DESIGNATION DEFINITION
<S> <C>
5 (maximum) Extraordinary performance
where the objective was
exceeded by a wide margin.
4 (high standard) Excellent performance where
the objective was exceeded.
3 (standard) Successful performance where
the objective was well met.
2 (low standard) Performance fell short of
goal.
1 (minimum) Performance was well below
expectations.
</TABLE>
6.0 PROCEDURE FOR BONUS CALCULATION AND APPROVAL
Each participant's total bonus will be calculated as
follows:
1) The standard bonus (see Section 3.1) is divided
into appropriate corporation/unit-individual
components (as defined in Section 4.0).
2) For the organizational components;
A. The final rating is converted to a percentage
factor (see Attachment I conversion table).
B. The factor is multiplied by the standard
organizational bonus.
C. There is no organizational award granted if
final overall rating is below 1.0.
3) For the individual component;
A. The final rating is converted to a percentage
factor (see Attachment III conversion table).
B. The factor is multiplied by the standard
individual bonus.
C. There is no individual award granted if final
overall rating is below 1.0.
4) To calculate the total bonus, the components are
added.
The Division Presidents will submit their recommendations
for individual incentive awards to their immediate
superiors. In all instances the recommendations for the
Corporate awards will be submitted to the Chief Executive
Officer for concurrence.
Corporate function heads will submit their recommendations
for individual awards to their immediate superior who will
then submit the recommendations to the Chief Executive
Officer for concurrence.
7.0 REMOVAL, TRANSFERS AND TERMINATIONS
7.1 Participants whose employment with the Company
is terminated because of retirement, death, or
disability:
- After the close of the plan year, but prior to
the actual distribution of awards for such year,
may be awarded a full incentive award for the
plan year. In the case of death, such payment
will be made to a beneficiary.
- After the beginning, but prior to the end of the
plan year, may receive an incentive award for
that year based on a prorated calculation
reflecting their employment with the Company and
participation in the Plan during the year.
Awards will not be paid for any period less than
six months participation in the plan year.
7.2 Participants who are terminated in the fourth
quarter of the year due to a re-structuring
which results in job elimination, may receive an
incentive award for that year based on a
prorated calculation reflecting their employment
with the Company and participation in the Plan
during that year.
7.3 Participants transferred during the plan year
within the Company will be awarded an incentive
payment through the division in which the
participant is employed at the end of the plan
year. It will be based on the contribution made
in each division in which the participant was
employed during the year. To this end a written
evaluation and rating must be completed by the
participant's superior upon transfer. The
awarding division will be charged for the full
amount of the bonus.
7.4 Notwithstanding the foregoing, a special
prorated incentive award shall be paid to
participants if, during the period between the
date of a change in control and the next award
date determined pursuant to Section 10:
1) the participant's employment is terminated
involuntarily other than for good cause, or
2) the Plan is terminated.
The amount of the award shall be calculated as a percentage
of period earnings based upon standard performance and
prorated through the date of termination of the participant
or the Plan, as applicable.
A change of control of the Company is defined as follows:
A. The acquisition by any individual, entity or group
(within the meaning of Section 13 (d) (3) or 14 (d) (2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company),
(ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
paragraph C of this Section 7.0 are satisfied; or
B. Individuals who, as of the date hereof, constitute
the Board of Directors of the Company (the "Board" and, as
of the date hereof, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
C. Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
D. Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(a) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the same Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may
be, (b) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(c) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
7.5 Participants who leave the company or are
terminated prior to the actual payment of award
for reasons other than retirement, death,
disability, termination in the fourth quarter
due to a restructuring which results in job
elimination, change in control, will forfeit the
award for that plan year.
8.0 INCENTIVE AWARDS THROUGH CONTRACTUAL AGREEMENTS
Incentive awards may be made to participants who do not meet
the six month eligibility requirements only if the following
conditions are met.
(1) Award must be made through contractual agreement
made upon hiring, re-assignment, or commencement
of special project or assignment. These
arrangements must be approved in writing by
Division President, Corporate Compensation,
Corporate V.P. Human Resources, and normal 1
over 1 approval matrix.
9.0 ADMINISTRATION OF THE PLAN
The Committee On Management of the Board of Directors
reserves the right to interpret, amend, modify or terminate
the existing program in accordance with changing conditions.
Further, no participant eligible to receive any payments
shall have any rights to pledge, assign, or otherwise
dispose of unpaid portion of such payments. The Committee
On Management is responsible for overall administration of
the Plan. It will determine who will receive incentives and
the amount of each incentive. It may also review the
standards and objectives for a particular year. The
Committee On Management may change or terminate the Plan at
any time and no person has any rights with respect to an
incentive award until it has been paid.
10.0 INCENTIVE AWARD DISTRIBUTION
Incentive awards, when payable, shall be paid in the latter
part of the month of February following the close of the
preceding fiscal year.
Participants may also elect to defer all or part of an
incentive award in accordance with the procedure set forth
in the Company's Deferred Compensation Plan.
BAUSCH & LOMB INCORPORATED
BY: /s/ Deborah K. Smith
DEBORAH K. SMITH
SENIOR VICE PRESIDENT
HUMAN RESOURCES
AGREED to this 1st day
of March, 1996.
EXHIBIT (10)-j
THE BAUSCH & LOMB INCORPORATED MANAGEMENT EXECUTIVE
INCENTIVE PLAN
As amended and restated 2/27/96
1.0 INTRODUCTION
The Management Executive Incentive Plan is established to
provide incentive compensation in the form of a supplement
to the base salaries of the top Corporate officers; to
attract and to retain, in the employ of the Company,
individuals of outstanding ability; and to align the
interests of those who hold positions of major
responsibility in the Company with the interests of the
Company's shareholders.
2.0 ELIGIBILITY
The Chairman and Chief Executive Officer, President and
Chief Operating Officer, Executive Vice and Chief
Administrative Officer, and Senior Vice President Finance
are eligible to participate in The Management Executive
Incentive Plan. The participant must be on the payroll in
an eligible position before July 1 of the plan year, to be
eligible for an award. Participants in this Plan are not
eligible to participate in the Executive Incentive
Compensation Plan.
3.0 DEFINITIONS
3.1 A standard incentive award has been established
for each salary grade or job band for
participants in this Plan and is expressed as a
percentage of period salary (i.e., eligible base
salary earnings for the year). The standard
percentages are:
Chairman and Chief Executive 65
Officer
President and Chief Operating 55
Officer
Executive Vice President 50
and Chief Administrative
Officer
Senior Vice President Finance 50
3.2 An approved incentive award is the incentive
award which has been approved by the Committee
On Management of the Board of Directors (the
"Committee on Management") to be paid by the
Company to the participant.
Actual incentive award amounts, based upon
organizational performance, can vary from 0% for
unacceptable performance to a range from a
minimum of 50% to a maximum of 175% of standard
for acceptable performance. In any event, an
award cannot exceed the maximum.
4.0 MEASURES OF PERFORMANCE
The Committee on Management will set performance measures to
be applied for incentive plan purposes. These performance
measures will determine 100% of the bonus calculation for
participants in this Plan.
4.1 The "Organizational Performance Management
System" (OPMS) has been established to evaluate
performance for the Management Executive
Incentive Plan.
The OPMS is based upon specific organizational
objectives, which are established during the
first quarter of the year by the Committee on
Management. These objectives include the
following:
<TABLE>
<CAPTION>
Performance Measures Weightings
<S> <C>
Sales growth 30%
EPS growth 30%
ROE 30%
Aggregate weighted 10%
long term vitality
ratings from each of
the operating divisions
</TABLE>
Performance levels for 5, 4, 3, 2, and 1 ratings
are defined by the Committee on Management prior
to end of the first quarter.
5.0 DEFINITION OF PERFORMANCE
The following "definitions of performance" are to be
utilized for the Plan:
<TABLE>
<CAPTION>
PERFORMANCE
DESIGNATION DEFINITION
<S> <C>
5 (maximum) Extraordinary performance
where the objective was
exceeded by a wide margin.
4 (high standard) Excellent performance where
the objective was exceeded.
3 (standard) Successful performance where
the objective was well met.
2 (low standard) Performance fell short of
goal.
1 (minimum) Performance was well below
expectations.
</TABLE>
6.0 PROCEDURE FOR BONUS CALCULATION AND APPROVAL
Each participant's total bonus will be calculated as
follows:
1) The standard award is calculated by multiplying
the participant's period salary by the standard
percentage set forth in Section 3.1.
2) The final organizational rating is determined by
weighting the performance ratings determined
under Section 5 in accordance with the
percentages in Section 4.1; adding the four
weighted ratings; and converting the total
performance ratings to a percentage factor
pursuant to Attachment I, conversion table.
3) The percentage factor is then multiplied times
the standard bonus.
4) There is no award granted if final
organizational rating is below 2.0.
7.0 REMOVAL, TRANSFERS AND TERMINATIONS
Participants whose employment with the Company is terminated
because of retirement, death, or disability:
- After the close of the plan year, but prior to
the actual distribution of awards for such year,
may be awarded a full incentive award earned for
the plan year. In the case of death, such
payment will be made to a beneficiary.
- After the beginning, but prior to the end of the
plan year, may receive an incentive award for
that year based on a prorated calculation
reflecting their employment with the Company
within the year and the award earned. Awards
will not be paid for any period less than six
months participation in the plan year.
Participants who leave the company for reasons other than
retirement, death, disability, change in control, or are
terminated prior to the actual payment of award will forfeit
the award for that plan year.
Notwithstanding the foregoing, a special prorated incentive
award shall be paid to participants if, during the period
between the date of a change in control and the next award
date determined pursuant to Section 10:
1) the participant's employment is terminated
involuntarily other than for good cause, or
2) the Plan is terminated.
The amount of the award shall be calculated as a percentage
of period earnings based upon standard performance and
prorated through the date of termination of the participant
or the Plan, as applicable.
A change of control of the Company is defined as follows:
A. The acquisition by any individual, entity or group
(within the meaning of Section 13 (d) (3) or 14 (d) (2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company),
(ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation
pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of
paragraph C of this Section 7.0 are satisfied; or
B. Individuals who, as of the date hereof, constitute
the Board of Directors of the Company (the "Board" and, as
of the date hereof, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than
the Board; or
C. Approval by the shareholders of the Company of a
reorganization, merger, binding share exchange or
consolidation, in each case, unless, following such
reorganization, merger, binding share exchange or
consolidation, (i) more than 60% of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the
same proportions as their ownership, immediately prior to
such reorganization, merger, binding share exchange or
consolidation, of the Outstanding Company Stock and
Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company, any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such reorganization, merger, binding share
exchange or consolidation and any Person beneficially
owning, immediately prior to such reorganization, merger,
binding share exchange or consolidation, directly or
indirectly, 20% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger,
binding share exchange or consolidation or the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors and (iii) at least a majority of the members of
the board of directors of the corporation resulting from
such reorganization, merger, binding share exchange or
consolidation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for
such reorganization, merger, binding share exchange or
consolidation; or
D. Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition,
(a) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the same Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may
be, (b) no Person (excluding the Company and any employee
benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or
indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(c) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other
disposition of assets of the Company.
8.0 ADMINISTRATION OF THE PLAN
The Committee On Management reserves the right to interpret,
amend, modify or terminate the existing program in
accordance with changing conditions, but only to the extent
authorized or permitted by law. The Committee On Management
is responsible for overall administration of the Plan. It
will determine who will receive incentives and the amount of
each incentive. It may also review the standards and
objectives for a particular year. The Committee On
Management may change or terminate the Plan at any time and
no person has any rights with respect to an incentive award
until it has been paid. Notwithstanding the foregoing, the
Committee on Management shall not exercise any discretionary
authority granted to it pursuant to this Section in a way
which would cause the Company to lose the benefit of the
performance based exemption from the $1 million cap on
individual compensation deductions for publicly traded
corporations set forth in IRC Section 162(m).
No participant eligible to receive any payments shall have
any rights to pledge, assign, or otherwise dispose of unpaid
portion of such payments.
9.0 INCENTIVE AWARD DISTRIBUTION
Incentive awards, when payable, shall be paid in the latter
part of the month of February following the close of the
preceding fiscal year.
Participants may also elect to defer all or part of an
incentive award in accordance with the procedure set forth
in the Company's Deferred Compensation Plan.
BAUSCH & LOMB INCORPORATED
BY: /s/ Deborah K. Smith
DEBORAH K. SMITH
SENIOR VICE PRESIDENT
HUMAN RESOURCES
AGREED to this 1st day
of March, 1996.
EXHIBIT (10)-l
THE BAUSCH & LOMB INCORPORATED SUPPLEMENTAL MANAGEMENT
EXECUTIVE INCENTIVE PLAN
As amended and restated 12/12/95
1.0 INTRODUCTION
The Supplemental Management Executive Incentive Plan is
designed to advance the interests of Bausch & Lomb and its
shareholders by (i) providing incentives for those key
executives who have overall responsibility for the
performance of the company; (ii) reinforcing corporate
financial goals; (iii) providing competitive levels of
compensation for key executives; and (iv) aligning
management and shareholder interests.
The Plan is established to allow the Committee on Management
of the Board of Directors (the "Committee"), in its
discretion, to make an incentive award in addition to that
calculated in The Management Executive Incentive Plan (MEIP)
if the executive's or company's performance exceeds the
performance measured by MEIP.
2.0 ELIGIBILITY
Senior officers with overall responsibility for the long
term performance of the Company are eligible to participate
in The Supplemental Management Executive Incentive Plan.
The Committee will designate the executives to participate
in the Plan. The participant must be on the payroll in an
eligible position before July 1 of the plan year, to be
eligible for an award.
3.0 SUPPLEMENTAL AWARDS
The Committee will make an award under this Plan if it
determines that such an award is in the interests of Bausch
& Lomb and its shareholders given the criteria set forth in
Section 1.0 above. Awards under this Plan may be made in
cash or Bausch & Lomb Class B Stock granted pursuant to the
1990 Stock Incentive Plan or any successor plan.
4.0 ADMINISTRATION OF THE PLAN
The Committee reserves the right to interpret, amend, modify
or terminate the existing program in accordance with
changing conditions. Further, no participant eligible to
receive any payments shall have any rights to pledge,
assign, or otherwise dispose of unpaid portion of such
payments. The Committee is responsible for overall
administration of the Plan. It will determine who will
receive incentives and the amount of each incentive. The
Committee may change or terminate the Plan at any time and
no person has any rights with respect to an incentive award
until it has been paid.
5.0 INCENTIVE AWARD DISTRIBUTION
Incentive awards, when payable, shall be paid in the latter
part of the month of February following the close of the
preceding fiscal year.
Participants may also elect to defer all or part of an
incentive award in accordance with the procedure set forth
in the Company's Deferred Compensation Plan. Any payments
made under this Plan which would result in incentive
compensation to a participant which would not be deductible
pursuant to IRC Section 162(m) ($1MM cap on individual
compensation deductions for publicly traded corporations)
shall, to the extent of such non-deductible compensation,
automatically be paid into the Deferred Compensation Plan on
behalf of the participant. Such deferred payment would be
invested at the direction of the plan participant, and would
be paid out subsequent to retirement.
BAUSCH & LOMB INCORPORATED
BY: /s/Deborah K. Smith
DEBORAH K. SMITH
SENIOR VICE PRESIDENT
HUMAN RESOURCES
AGREED to this 15th day
of January, 1996.
EXHIBIT 11
<TABLE>
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
For the Years Ended
Dollars & Shares in
Thousands - Except Per December 30, December 31,
Share Data 1995 1994*
<S> <C> <C>
Net earnings $112,022 $31,123
Actual outstanding Common
and Class B shares at
beginning of year 58,992 59,118
Average Common shares
issued for stock options
and effects of assumed
exercise of Common stock
equivalents and repurchase
of Common and Class B
shares (1,140) 621
Average Common and Class B
shares outstanding 57,852 59,739
Net earnings per Common
and Common share equivalent $ 1.94 $ 0.52
*Amounts have been restated for certain items as more fully
described in Note 2 - Restatement of Financial Information
</TABLE>
EXHIBIT 12
<TABLE>
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO
FIXED CHARGES
<CAPTION>
Dollar Amounts December 30, December 31,
in Thousands 1995 1994*
<S> <C> <C>
Earnings before provision $211,847 $116,342
for income taxes and
minority interest
Fixed charges 47,584 42,954
Less: Capitalized (260) (260)
interest, net of current
period amortization
Total earnings as adjusted $259,691 $159,556
Fixed charges:
Interest (including $ 45,765 $ 41,379
interest expenses and
capitalized interest)
Portion of rents 1,819 1,575
representative of the
interest factor
Total fixed charges $ 47,584 $ 42,954
Ratio of earnings to 5.46<F1> 3.71<F2>
fixed charges
*Amounts have been restated as more fully described in Note
2 - Restatement of Financial Information.
<FN>
<F1> Excluding the effects of the gain on sales of the
Sports Optics Division and restructuring charges described
in the Notes To Financial Statements, the ratio of earnings
to fixed charges at December 30, 1995 would have been 5.26.
<F2> Excluding the effect of the goodwill impairment charge
described in the Notes To Financial Statements, the ratio of
earnings to fixed charges at December 31, 1994 would have
been 5.46.
</FN>
</TABLE>
Financial Highlights
FOR THE YEARS ENDED
DECEMBER 25, 1993, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(Dollar Amounts In Thousands -- Except Per Share Data)
1
<TABLE>
<CAPTION>
Percentage
Change
1993* 1994* 1995 From 1994
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BUSINESS RESULTS (INCLUDING
RESTRUCTURING, GAIN ON SALE
OF SPORTS OPTICS DIVISION
AND GOODWILL IMPAIRMENT CHARGES)
Net sales $1,830,050 $1,892,686 $1,932,883 2%
Business segment earnings 271,847 163,616 271,555 66%
Net earnings 138,902 31,123 112,022
Per common share:
Net earnings 2.31 0.52 1.94
Dividends declared 0.88 0.955 1.01 6%
Shareholder's equity at
year end 15.38 15.50 16.32 5%
Return on average shareholder's equity 15.5% 3.2% 11.9%
---------
BUSINESS RESULTS (EXCLUDING
RESTRUCTURING, GAIN ON SALE
OF SPORTS OPTICS DIVISION
AND GOODWILL IMPAIRMENT CHARGES)
Net sales $1,830,050 $1,892,686 $1,932,883 2%
Net sales from continuing
product lines 1,730,685 1,781,669 1,914,625 7%
Business segment earnings 320,647 238,616 295,252 24%
Business segment earnings from
continuing product lines 312,682 228,260 296,552 30%
Net earnings 175,365 106,123 108,552 2%
Per common share:
Net earnings 2.92 1.78 1.88 6%
Return on average shareholder's
equity 19.5% 11.0% 11.5%
---------
OTHER FINANCIAL DATA
Capital expenditures $ 107,232 $ 84,807 $ 95,481
Working capital 669,627 277,428 70,870
Common shareholders of record
at year end 8,100 9,100 8,100
Average common shares
outstanding (000s) 60,115 59,739 57,852
High/low stock price $57-1/2 - $43 $53-7/8 - $30-5/8 $44-1/2 - $30-7/8
---------
</TABLE>
*Amounts presented in this table and in tables and discussions included in pages
2-26 have been restated for certain items as more fully described in Note 2 --
Restatement Of Financial Information.
Contents
1 Financial Highlights
2 Letter to Shareholders
6 Our Values
18 The Healthcare Segment
25 The Optics Segment
27 Financial Review
43 Financial Statements
46 Notes to Financial Statements
65 Report of Independent
Accountants
65 Report of Governance
66 Selected Financial Data
68 Divisions and Subsidiaries
70 Directors and Officers
71 Corporate Information
1995 Annual Report 1
<PAGE>
To Our Shareholders
Fellow shareholders
1995 was our second tough year in a row. We remained challenged on several
fronts -- particularly in our contact lens business, where the emerging move to
frequent lens replacement underscored the Company's efforts to substantially
reduce manufacturing costs while increasing production on a global scale. Bausch
& Lomb's stock price rose during the year, but was still reflective of a
sluggish earnings recovery that lagged behind our plan. Total sales amounted to
$1,933 million in 1995, an increase of 2% from 1994 and net earnings were $112
million. Consolidated revenues from continuing product lines rose 7% over 1994
to $1,915 million, while net earnings reached $109 million or $1.88 per share
excluding non-recurring items. That compared to 1994 net earnings of $106
million or $1.78 per share. We had expected to do better on the earnings front,
and are moving swiftly to enhance Bausch & Lomb's underlying profitability.
Bausch & Lomb historically has ranked among America's most admired corporations,
but continued negative publicity related to past accounting and operational
issues has tarnished our reputation. We genuinely believe that those problems
would not occur in today's Bausch & Lomb, given the many changes we've made to
our marketing practices and managerial approach to our businesses. We have also
refocused the objectives linked to our executive compensation system to strike
an appropriate balance between the achievement of annual operating plans and the
creation of long-term growth in the value of our Company. Additionally, in
January 1996, we restated Bausch & Lomb's financial results for 1993 with a
corresponding restatement for 1994, and thus resolved continuing uncertainties
related to past matters which have taken management's focus away from the tasks
necessary to move our Company forward.
We Are Moving On
Bausch & Lomb has very attractive business opportunities and the resources,
especially strong cash flow, to fund their pursuit. Fulfilling this potential
requires that we do five things.
Sharpen the focus of our product portfolio and investment decisions. One place
companies sometimes fall short is in their reluctance to fully realize asset
values through divestiture or other forms of corporate restructuring. To us,
growth isn't good if it fails to pay off for the shareholder, and bigger is only
better if it provides a competitive advantage. Like other companies, Bausch &
Lomb consists of a mix of businesses -- some preeminent, strong global
franchises, others where franchise value has weakened or where capital
requirements are large relative to the return we can confidently foresee. Some
of our businesses may be worth more to others than to the Bausch & Lomb
shareholder, and certain of them may have value that can be realized through
various restructuring moves. Acting on these views, we divested the sports
optics business in 1995, realizing a significant gain over book value. In
December, the board of directors authorized management to evaluate the sale of
our Interplak line of power toothbrushes due to its weak financial performance.
Similar efforts in the future should sharpen our focus on core businesses and
stimulate a greater return to shareholders.
Rekindle work force pride and enthusiasm. Although two tough years have tested
the morale of Bausch & Lomb men and women, our employees continue to rise to
challenges in an admirable and effective manner. Now, we need to give them a
reason to feel pride in this company again, and further incentives to place
their energies and trust in us. In the years ahead, we will be asking more of
our employees, so we must continue to work on creating an environment where
talented people can do extraordinary things. This environment must be built on
trust and our commitment to people. It will be an environment where ideas and
information circulate freely through all levels. We will foster a workplace that
produces continuous improvement with higher
2 Bausch & Lomb
<PAGE>
quality products and greater productivity. Through a focus both on increasing
individual competence and providing a work environment which allows employees to
contribute to the maximum of their potential, we will raise employee
satisfaction and bottom-line performance. If we do these things well, we will
attract and retain a dynamic, diverse and capable work force that can drive our
Company to new levels of achievement.
Accelerate new product flow. We are shrinking our time to market -- aiming, for
example, to cut by more than a year the time it takes to bring a new Ray-Ban
sunglass design to the consumer. In addition, Bausch & Lomb is asking more of
its annual research and development spending and we will be taking steps in 1996
to improve the yield from those investments. Competitively enhancing niche
acquisitions and more fruitful reinvestments can invigorate our business. We
intend also to aggressively defend our present areas of product leadership, like
sunglasses, from competitive threat by increasing our focus on advertising.
Today, throughout Bausch & Lomb, we are dedicated to identifying the needs of
our customers and supplying them with products and services which exceed their
expectations. Some of the problems of the past few years clearly arose because
we stayed too long with several products that had fallen out of sync with trends
in their marketplace. We expect 1996 to provide solid evidence that Bausch &
Lomb's product lines are again becoming closely aligned with the forces driving
market growth around the world.
Recent investments to broaden our product offering reflect an emphasis on
businesses that are central to our future. The acquisitions of Arnette Optic
Illusions and Award plc early in 1996 logically fortify our competitive
positions in sunglasses and contact lenses.
Arnette is a designer and marketer of high-performance sports sunglasses and
goggles. Bausch & Lomb has been under-represented in this rapidly growing market
segment, but will now take on a major role. Arnette sunglasses have earned a
strong following among youthful consumers engaged in such sporting activities as
cycling, surfing and snow boarding -- people who set styling trends for youth
around the world. Coupled with the many new Ray-Ban, Revo and other sunglass
models scheduled to be introduced this year, the Arnette acquisition should
enable us to improve on the rate of sales growth attained in 1995.
Award plc manufactures a high-water, daily disposable soft contact lens in
Europe. Its patented cast mold manufacturing technology and very efficient
distribution process respond directly to the high volumes, short cycle times and
low unit costs needed to make single-use soft contact lenses affordable for
consumers and profitable for Bausch & Lomb. A further example of our investment
[Photo: WILLIAM H. WALTRIP, Chairman and Chief Executive Officer(right)
WILLIAM M. CARPENTER, President and Chief Operating Officer]
1995 Annual Report 3
<PAGE>
To Our Shareholders
strategies is the $30 million we are spending for the installation of
next-generation soft contact lens manufacturing technology which is being
developed in combination with IBM. This new technology will significantly lower
the unit manufacturing cost of our SofLens66 contact lens which is ideal for two
week or more frequent replacement. During 1995, our sales of lenses in this
market surged 38% ahead of the preceding year, signaling the excellent potential
of this market.
To the extent we seek additional acquisitions, they are likely to reflect the
pattern established by these transactions -- manageable in scale, easy to
finance and very supportive of our existing businesses.
It is also worth noting that we are in the process of developing a unified
vision-care strategy which leverages our shared strengths and opportunities in
contact lenses, lens care and eye care products. There are many areas in the
world in which these lines are distributed through common channels. There are
also markets in which the lens care business has matured as demand for
disposable and frequent replacement contact lenses is exploding. As the
worldwide leader in vision care, we can leverage the breadth of our product line
and in-market capabilities, especially in markets that are in different stages
of evolution.
Improve operational effectiveness. As you know, we pledged last year to reduce
overhead expenses by $50 million over the next few years. Yes, we want to cut
costs to improve the bottom line; but we also want to eliminate the bureaucracy
that can stifle initiative. Decisions on how to achieve this reduction in costs
should be reached by the end of the year, setting the Company up for further
gains in profitability in 1997 and 1998. Our streamlining should improve Bausch
& Lomb's bottom line while also restoring some of the responsiveness that
endowed the Company's historical success.
Bausch & Lomb is striving to be observant, clear-thinking and responsive. We
want to be the best player in our markets and are dedicated to providing our
people with the support and structure necessary to realize that vision
consistently. As part of these efforts, Bausch & Lomb established a $27 million
restructuring reserve in the fourth quarter of 1995, about half of which
resulted from a planned reconfiguration of our sunglass manufacturing process
worldwide. Our new manufacturing strategy incorporates three fully integrated
production sites in the U.S., Europe and Asia. This approach will improve the
speed to market, flexibility and future profitability of Bausch & Lomb's
sunglass business.
Build shareholder value. This idea is expressed in most annual reports. So,
what's different at Bausch & Lomb? Commitment. We will align intent with
execution. We understand very clearly that restoring the Company's reputation,
especially in the toughest market of all -- the capital market -- depends on
action, not intent. We will not drag our feet. This is evidenced by the
accelerated nature of our cost reduction efforts, our current examination of
Bausch & Lomb's product portfolio and our more stringent requirements for return
on invested capital.
We also know that earnings are only one measure of financial progress.
During 1995, our Company was very successful in its ongoing efforts to enhance
cash flow. $278 million was generated from operations, and these funds were
combined with the proceeds from the sale of our sports optics business to
facilitate the repurchase of 2.5 million shares of Common stock over the course
of the year. In 1996, we plan to continue to repurchase our stock in the open
market at a rate of about one million shares, or perhaps greater levels if
circumstances warrant. Our capital expenditures for 1996 are budgeted in a range
of $130 million, and will be heavily oriented toward our core businesses,
particularly contact lenses. Research and development spending is budgeted to
increase at a rate of about 15%.
4 Bausch & Lomb
<PAGE>
Many Areas Performed Well In 1995
The balance of this report on 1995 demonstrates that there's much in which the
men and women of Bausch & Lomb can take legitimate pride. In many of our
worldwide operations, their effort and performance were truly extraordinary.
These areas included our prescription pharmaceutical business, where sales
increased almost 30% over the previous year, with a significant percentage of
revenues coming from products that have been on the market less than two years.
Our pharmaceutical profit margins also continued to expand. The Company's
evolving mix of generic and proprietary ophthalmic drugs, together with our
highly competitive manufacturing base, positions Bausch & Lomb for further
strong gains in performance in this product area during 1996.
We were also very pleased by the performance of our biomedical business in 1995.
It continued to post moderate sales growth while maintaining strong
profitability and cash flow. Within this overall product area, we are making
acquisitions and seeking other types of opportunities to speed the development
of new biomedical products and services that move beyond the traditional
laboratory animal business and put us on the forward edge of new markets.
In another key business area, we were successful in defending our share of the
contact lens care market against intensified competition from private label
products. And it's also worth noting that our lines of eye care products,
over-the-counter medications, dental implants and hearing aids all attained
revenue growth in 1995 that met or exceeded the 20% level.
Daniel E. Gill Retires
On behalf of Bausch & Lomb, we express our appreciation to Daniel E. Gill, who
retired as chairman and chief executive officer at the end of 1995. Mr. Gill
served our Company for 17 years, leading a restructuring in the 1980s that saw
Bausch & Lomb grow from a small ophthalmic and scientific instruments company
into a global competitor in major healthcare and optical markets.
One of management's objectives is to provide an environment in which Bausch &
Lomb men and women can succeed. We will do this by bringing clarity to our
aspirations and effectively executing a new, more embracing business plan,
paying special attention to the values all of us bring to our business conduct.
To that, we pledge our very best efforts in 1996 and beyond.
Sincerely,
/s/ William H. Waltrip
William H. Waltrip
Chairman and Chief Executive Officer
/s/ William M. Carpenter
William M. Carpenter
President and Chief Operating Officer
A NEW SENIOR MANAGEMENT TEAM IS NOW
ACTIVELY READYING THE COMPANY FOR
A FAR MORE EXCITING FUTURE.
William H. Waltrip was named chairman and chief executive officer of Bausch &
Lomb in December 1995. He is intimately familiar with the Company, having served
as a director for the past ten years. During his business career, he has held
numerous senior executive positions, including president and chief operating
officer of Pan American World Airways and IU International Corporation and chief
executive officer of Purolator Courier Corporation.
Also in December, William M. Carpenter was named president and chief operating
officer. Mr. Carpenter joined Bausch & Lomb in March 1995 as executive vice
president and global business manager -- Eyewear. Mr. Carpenter was previously
president and chief executive officer of the U.S. subsidiary of Reckitt &
Colman, plc. Earlier in his career, he held a number of executive positions
with Johnson & Johnson's healthcare and consumer products businesses.
1995 Annual Report 5
<PAGE>
"The secret of success,"
said British Prime Minister
Benjamin Disraeli, "is
constancy of purpose." For
Bausch & Lomb, constancy
is found in the values that
guide the corporation:
Partnership with employees.
Partnership with customers.
Innovation and finding
a better way. A commit-
1995 Annual Report 6
<PAGE>
ment to the communities in which
it operates. And a clear
understanding that profits
are ultimately the by-
product of ethical, expert,
visionary enterprise. As the
following pages
demonstrate, Bausch &
Lomb's growth and culture
are built on its values. And
its values are the secret to its
long-term success.
1995 Annual Report 7
<PAGE>
Importance of Customers
and Quality
********
MAKING OUR CUSTOMERS' SUCCESS THE TOP PRIORITY
Janice Whisman, a Bausch & Lomb
national account manager in Texas,
is part of a three-person team that
works exclusively with the Kroger stores.
"Our whole focus," says Janice, "is
to be Kroger's most valued resource
in the eye care category by applying
our technology to lower our mutual costs
and increase their sales. Our goal
is to be a long-term partner."
1995 Annual Report 8
<PAGE>
Janice and her team are part of Bausch & Lomb's commitment to reinforce customer
relationships through enhanced, measurable service improvements. Rather than
serve a number of accounts, they devote their efforts and thinking singularly to
the needs of one customer.
Boston and Envision rigid
gas permeable lens materials
are at the forefront of
lens technology and performance.
"The team approach has really paid off," says Whisman. "Since we started in
early 1994, Kroger and Bausch & Lomb have had two great years together. In 1995,
we were up 50.7% in the general eye care category. Our total business increased
by 8.5% while the health and beauty care lines rose 4.5%."
Technology is key. More than half of all customers of the Company's Personal
Products Division, including the major national accounts, are now linked to
Bausch & Lomb through electronic data interchange (EDI), a computerized,
paperless ordering and invoicing system. With EDI, ordering is almost
instantaneous so stocking shortfalls are practically nonexistent.
Some retailers, including Kmart, request Vendor Managed Inventory (VMI), where
Bausch & Lomb ships its products automatically to the customer's distribution
centers, based on direct access to incoming scanner data. The result is a more
profitable balance between low inventories, which reduce costs, and constantly
replenished shelf stock, which avoids any loss of sales from out-of-stocks.
For a growing number of customers, Bausch & Lomb provides full category
management, evaluating the monthly sales and shelf positioning of all brands of
eye care products to optimize profit margins and improve sales. Strong brands
are merchandised more advantageously. Perpetually weak sellers are reduced in
prominence or de-listed. The customer achieves a strategic refinement of shelf
inventory that might not otherwise be possible. The consumer is able to
consistently find the desired brand and size.
"We work with our customers in partnership to help them meet their strategic
plans," says Whisman. "And we get results. So when they have eye care issues, we
want them to call Bausch & Lomb. That's our goal."
================================================================================
Better Technology,
Better Service
Ordering rigid gas permeable contact lenses used to take a major account 10
days, a frustrating delay for wearers. In 1995, working together with National
Vision Association (NVA) -- the manager of hundreds of Wal-Mart optical
departments -- Polymer Technology Corporation streamlined ordering with
electronic data interchange, bar coding and rapid overnight delivery. Today,
from prescription to pick up, Polymer's popular made-to-order Boston and
Envision lenses can be ready in as little as four days, a competitive edge for
Polymer and NVA.
================================================================================
The Vendor Managed Inventory program
helps speed the delivery of ReNu
multi-purpose solution to Kmart
and other mass merchandisers.
1995 Annual Report 9
<PAGE>
A Partnership with
Employees
*****
GIVING PEOPLE THE OPPORTUNITY TO EXCEL
Derek Sheridan and Carmel Cheasty
are part of a remarkable
organizational transition at Bausch
& Lomb's Waterford, Ireland sunglass
plant. In only three years, most of
the plant's 250 hourly employees
have moved from assembly line style
manufacturing into highly
productive work teams that are
reducing assembly lead times and
cutting defect rates by half.
10 Bausch & Lomb
<PAGE>
"Employees are now solving their own problems," says Derek, a training
facilitator at the plant, "and they are being given the skills to do it."
One of three fully-inspected sunglass plants in Bausch & Lomb's Global Product
Delivery Strategy, Waterford has been training its employees to work in
self-directed teams of five to 12 people. The goal is flexibility -- replacing
the narrow focus of a single job skill with cross-training, teamwork and the
mastery of many skills.
Ray-Ban Orbs sunglasses, produced
at the Company's Waterford, Ireland
plant represent a new generation of
contemporary designs that are
commanding consumer interest in
Europe and other markets.
================================================================================
Uncommon Commitment
Employees at Bausch & Lomb's Charles River Laboratories subsidiary have a unique
responsibility: They breed and tend thousands of rodents and other animals used
for biomedical research. In dedicated teams, they perform their daily routines
in sterile isolation, constantly mindful that a single breach in "biosecurity"
could compromise the health of an entire colony. "We spend a lot of time
educating, training and motivating," says Dave Johst, vice president of human
resources. "But the people here are genuinely inspired by the fact that their
work is indispensible to life-giving research."
================================================================================
"People still get assembly and machine-skill training," says Derek, "but we also
train them in interpersonal and communications skills -- how to listen and be
assertive. We do continuous improvement training, team building and leadership
training. We even teach our people how to conduct meetings."
Much of the training at Waterford encourages employees to think independently
and offer suggestions for continuous improvement. "The IQ of the team is greater
than any single member," says General Manager Brendan Power. "Instead of waiting
for an engineer or an accountant or someone else to make an improvement, the
teams will try it themselves. And nine times out of ten they'll come up with the
solution."
The results have been exceptional. Waterford has halved its defect rate. Soon, a
significant number of the 400 individual products manufactured at the plant will
no longer require 100% inspection, simply random quality samplings. "There has
been a very significant improvement in productivity arising from the fact that
the product is made right the first time," says Power. "Our people are building
in the quality."
For Bausch & Lomb, the growing responsiveness and agility of Waterford's
workforce is an invaluable asset in the ever-changing fashion sunglass market.
"As consumer requirements change and the marketplace changes," says Butch
Sumpter, vice president, global manufacturing operations, Eyewear, "the most
significant driving factor is going to be the ability for any manufacturing
organization to react quickly and cost-effectively, to translate these
requirements into the products of tomorrow. At Waterford, our people are doing
that today."
Teresa Power, a Waterford, Ireland manufacturing
employee, wears Ray-Ban Sidestreet sunglasses,
which are experiencing strong global demand since
their 1995 introduction.
1995 Annual Report 11
<PAGE>
The Role of Profits
*****
INVESTING WISELY FOR A PROFITABLE FUTURE
Diane Nelson is an aseptic filling operator
at one of the newest and best-equipped
pharmaceutical plants in the world -- Bausch
& Lomb's Tampa, Florida facility. "I've had
jobs where I've felt limitations on my
success," she says. "Here, I feel like
there's an opportunity to reach as far as I
can. This Company encourages us not to settle
for anything less."
12 Bausch & Lomb
<PAGE>
During 1994 and 1995 Bausch & Lomb's
Pharmaceutical Division received more generic
drug approvals than any other company in the
U.S.
================================================================================
China: Cultivated Growth
Bausch & Lomb entered the Chinese market in 1987, years ahead of competitors.
Today, most of China's two million contact lens wearers use Bausch & Lomb lenses
and care products, a great start for a brand franchise taking root in a market
that will continue to grow 10% per year and could become the world's second or
third largest economy by 2004. Recently, the Company expanded its joint venture
manufacturing plant in Beijing, continued to educate hundreds of practitioners
and formally introduced Ray-Ban sunglasses. Ray-Ban quickly became the leading
premium sunglass brand in China.
================================================================================
The Tampa facility is the manufacturing foundation of Bausch & Lomb's U.S.
pharmaceutical business. Launched in 1985 as a small start-up with a few
ophthalmic drugs and a line of surgical instruments, the division is now the
U.S. market leader in ophthalmic generics and an emerging factor in proprietary
ophthalmic products. Both markets together are worth about $1.1 billion per year
in the United States alone.
In 1995, the U.S. pharmaceutical business grew more than 30%, based primarily on
its ability to obtain FDA approval for generics. For the years 1994 and 1995,
the Bausch & Lomb Pharmaceutical Division received more generic product
approvals than any other company in the United States. Most were for eye care
products, such as antibiotics, anti-inflammatories and anti-glaucoma solutions,
suspensions and ointments. All will carry the trusted Bausch & Lomb name.
"The Tampa plant is critical to our growing success," explains Alan Dozier,
corporate vice president and president of the Bausch & Lomb Pharmaceutical
Division. "We have one of the most advanced plants in the world, staffed by a
highly motivated workforce. It was a long-term invest-ment that's now paying off
with cost competitive, high-quality products."
In the coming years, growth in generics will come from a combination of internal
product development, licensing and potentially, acquisitions. In 1995, the
division moved further into proprietary ophthalmic products through an agreement
with Pharmos to manufacture and market Lotemax, an ophthalmic anti-inflammatory.
The agreement includes the co-development of two additional products. The
division is also pursuing drug delivery technologies designed to transform
generics into patent-protected products with high profit margins.
Internationally, the success of the U.S. business is equalled by Dr. Mann
Pharma, Bausch & Lomb's German subsidiary and the headquarters of the Company's
worldwide pharmaceutical business. A highly respected marketer of both
over-the-counter medications and prescription ophthalmics, Dr. Mann registered a
number of new products in the worldwide market in 1995 and has many
registrations being developed in Europe, Asia and South America including
Russia, India and China.
Betamann, Floxal and Vidisic contribute to
Dr. Mann Pharma's role as one of the leading
marketers of ophthalmic pharmaceuticals in
Germany.
1995 Annual Report 13
<PAGE>
Innovation and Finding
a Better Way
*****
ALLOWING TALENT THE FREEDOM TO FLOURISH
Jay Kunzler and Yu-Chin Lai,
principal scientists at
Bausch & Lomb's R&D
facility in Rochester, spent years
creating new polymers before
inventing alphafilcon A, the
material in SofLens66 contact lenses.
"This material is a breakthrough,"
says Lai. "Its chemistry is unique.
Its potential is huge. And there's
nothing else like it on the market."
14 Bausch & Lomb
<PAGE>
Development of SofLens66 lenses began almost incidentally with a request from
Bausch & Lomb Europe in 1991 for a high-water contact lens. While the U.S.
market had yet to show much interest in high-water contact lenses, demand was
taking off in Europe.
================================================================================
A Growing Category
Bausch & Lomb has been making anti-reflective coatings for over 50 years, mainly
for specialized medical and other lighting applications. In 1995, the Thin Film
Technology Division introduced Marathon, an anti-reflective coating for
prescription lenses. Highly scratch-resistant and color-neutral, Marathon
coatings significantly reduce glare from eyeglass surfaces. "In Europe, about
60% of all prescription eyewear is coated. In Japan, it's 95%," says division
president Gayle Johnston. "But in the U.S. it's only 5%. Clearly, Marathon
coatings are entering a growing category at the right time."
================================================================================
Kunzler and Lai knew well the challenges of high-water content lenses. The
gel-like polymers are notoriously prone to tearing. With alphafilcon A, they
solved the problem.
"The final material is 66% water which is an exceptionally high water content,
which aids comfort," says Kunzler. "It has high tear strength for excellent
patient handling and durability. And it's non-ionic. Competing high-water
products are ionic and tend to absorb proteins from the eye, unlike
aphafilcon A."
When released to the European market as Medalist 66 lenses in 1993, this product
immediately began capturing market share. "We looked at its success in Europe
and realized the potential for a new lens that could compete with disposables
in the United States," says Carl Sassano, senior vice president and global
business manager -- Contact Lenses.
Sassano was the executive champion of a hand-picked team whose job was to bring
SofLens66 lenses to the U.S. market as quickly as possible. Led by Debbie Corio,
national account manager for retail optical, the team launched SofLens66 lenses
in July 1995, the fastest U.S. product introduction in the Company's history.
SofLens66 contact lenses moved from design to
launch in five months...the fastest product
introduction in Bausch & Lomb history.
Concurrently, Bausch & Lomb had contracted with IBM to automate the cast molding
process. In less than two years, an IBM-engineered prototype machine has
demonstrated the possibility of manufacturing alphafilcon A lenses at less than
half the cost of conventional cast molding. Bausch & Lomb has since committed
$30 million to install this "next generation" of contact lens manufacturing
technology.
"The prices of today's disposables haven't changed much in five years," says
Sassano. "By taking half the cost out of making the lenses, we can greatly
improve our return on investment and redirect some of that savings into
promotion to further advance market penetration. There's no doubt about the
market for SofLens66 lenses. It's a big one."
The success of Gold Medalist Toric and
SofLens66 contact lenses is based on
excellent performance that has earned the
support of eye care professionals.
1995 Annual Report 15
<PAGE>
Our Company
and Our Community
******
CONTRIBUTING TO A BETTER QUALITY OF LIFE
"We never really appreciated a bird singing
until we recently heard one through the ears
of our four-year-old daughter Alysse," wrote
Patty and Brent Rathburn of Leucadia,
California. "Thanks to you and the Children's
Foundation, Alysse is now hearing the birds,
music, her own footsteps and even whispers...
Our thanks alone will never be enough..."
1995 Annual Report 16
<PAGE>
Patty and Brent wrote their thank-you letter in July of 1995 to Sharon Hudgens
of the Sears Hearing Aid Center in Carlsbad, California. After months of
searching without success for financial assistance to purchase hearing aids for
their daughter, they found the telephone number of the Sears outlet in the
Yellow Pages. Sharon, a hearing aid fitter, was aware of the Miracle-Ear
Children's Foundation and obtained an application for the Rathburns. A short
time later, the family was approved and Alysse was fitted with two hearing aids
at no cost.
Hundreds of families are helped
each year by Miracle-Ear
Children's Foundation.
================================================================================
The Gift of Vision
About one child in every 5,000 is born without the eyes' natural lenses, or must
have them removed at birth -- a procedure known as infantile surgical aphakia.
To avoid blindness, they wear powerful extended-wear contact lenses until
adulthood when intraocular lenses can be implanted. Despite ongoing difficulties
in securing the raw material for its SilSoft "aphakic" contact lenses, Bausch &
Lomb continues to provide this small patient base with this vital service. "The
SilSoft line is not about profits," explains Chuck Dushman, group product
manager, Contact Lens Division. "It's about doing the right thing."
================================================================================
Alysse is one of more than 1,200 children who have received hearing aids since
the Miracle-Ear Children's Foundation was established in 1990. Headquartered in
Minneapolis, Minnesota, the non-profit foundation works through the more than
1,000 Miracle-Ear franchise centers to help children whose families do not
qualify for public assistance but can't afford to purchase the aids.
"Generally, families with very low incomes can obtain hearing aids through state
medicaid," says Dick Brandt, director of the Miracle-Ear Foundation and
director, marketing and research/product information for Miracle-Ear. "It's
families with annual incomes between $20,000 and $30,000 who have a problem.
Insurance doesn't normally cover hearing aids, so they are usually on their
own."
In 1995, the Foundation received about 300 applications from across the United
States and more from franchisees in Puerto Rico, Taiwan and Mexico. About 225
will eventually be approved. In most cases, two hearing aids are supplied to
each child, at a retail cost of approximately $1,000 per aid.
In 1995, the Foundation also published an informative 16-page pamphlet entitled
"Your Child's Hearing Loss, First Steps For You and Your Family." This
reassuring pamphlet answers many questions and provides a list of valuable
resources for concerned parents.
"The Foundation offers Miracle-Ear a unique way to work in partnership with its
many franchisees," explains Brandt, "to put something back into the communities
where we have a presence."
"The long and the short of it," wrote the Rathburns, "is that Sharon Hudgens,
Miracle-Ear and the Children's Foundation gave Alysse the chance to hear like a
normal child... [We] can never fully express our heartfelt thanks."
Sharon Hudgens, a hearing aid fitter in
Carlsbad, California fit Alysse Rathburn with
two hearing aids at no cost to the family.
1995 Annual Report 17
<PAGE>
The Healthcare Segment
================================================================================
THE HEALTHCARE SEGMENT FIVE-YEAR SUMMARY OF RESULTS
Dollars In Millions 1991 1992 1993 1994 1995
Net sales $943.8 1,033.2 1,169.2 1,249.9 1,359.5
Business segment
earnings $102.4* 176.1 192.3** 91.5*** 229.2+
* Includes restructuring and special charges of $50.3 million.
** Includes restructuring charges of $15.9 million.
*** Includes goodwill impairment charge of $75.0 million.
+ Includes restructuring charges of $7.9 million.
Revenues in Bausch & Lomb's healthcare segment increased 9% to a record $1.4
billion in 1995. Earnings for the segment also reached an all-time high. The
gain in revenues was led by products in the medical sector, notably contact
lenses, pharmaceuticals, dental implants and hearing aids, where sales growth
reached double digits.
================================================================================
THE PERSONAL HEALTH SECTOR
Contact Lens Care Products
Bausch & Lomb's global contact lens care business attained a 5% growth in
revenues in 1995, a result which reflected a moderation in demand in the U.S.
market versus prior years. Increased soft lens solutions shipments in Europe,
Asia and Latin America and good demand for rigid gas permeable lens care
products, including the Boston line, led revenue gains. Bausch & Lomb maintained
its worldwide leadership position in lens care, including the U.S., where the
Company's market share reached a new high during the year. The Company's U.S.
sales were even with 1994 results, the first time in many years that domestic
revenues have not increased. Total operating earnings were down slightly from
1994.
Worldwide sales of ReNu multi-purpose solution, the Company's flagship product,
ran slightly ahead of 1994. Outside the U.S., where about 40% of the Company's
lens care business originates, demand for the Company's multi-purpose solution
continued to grow rapidly. Total non-U.S. lens care sales rose 13% over 1994.
European sales increased 13%, while Latin American revenues rose 22% and Asian
sales grew 10%.
The Company's line of rigid gas permeable contact lens solutions continued to
perform in an excellent manner with a 16% increase in global revenues over 1994.
Contributing to these results were the successful launches of two new products
in the U.S.: Boston Simplicity, the first multi-purpose solution for rigid gas
permeable lenses in this market, and Boston Advance comfort formula conditioning
solution, an improved version of the Company's leading product in this category.
Bausch & Lomb's leading line of contact lens
care products are manufactured and sold
around the world.
The outlook for the U.S. lens care business is mixed. Total soft lens care sales
are expected to remain flat in 1996, with gains by multi-purpose solutions and
lubricant lens care products offsetting a continuing decline in traditional
products such as saline, daily cleaners and enzymatic tablets. This shift is
being driven by the increased use of frequent replacement and disposable contact
lenses. The Company's strong share of the chemical market will be challenged
again in 1996 by new competitive entries. It is encouraging to note that the
ReNu line remains the number-one brand both with doctors and at retail, despite
several new competitive entries in 1994 and 1995.
============================== [BAR CHART] ==================================
Worldwide Sales For RENU Product Line
Dollars In Millions
91 $111
92 $152
93 $197
94 $260
95 $277
================================================================================
18 Bausch & Lomb
<PAGE>
This strong brand name provides a platform for our continued leadership in the
chemical market.
Outside the U.S., the potential for future sales growth is substantial. In most
countries of the world, the contact lens wearer population is increasing.
Additionally, multi-purpose solutions, which currently comprise more than half
the U.S. market, represent less than a quarter of the European market and
virtually none of the Japanese market.
Boston Simplicity solution's one-bottle
regimen for rigid gas permeable lenses
eliminates the need for two separate products
to clean and condition lenses.
================================== [PIE CHART] =================================
Geographic Mix Of
Bausch & Lomb's 1995 Lens Care Revenues
U.S. 61%
CANADA & LATIN AMERICA 6%
EUROPE, MIDDLE EAST & AFRICA 17%
ASIA-PACIFIC 16%
================================================================================
U.S. Share Soft Lens Care
Starter Kits
1993 1994 1995
ReNu Multi-Purpose Solution 41% 42% 42%
Competitor 1 40% 40% 35%
U.S. Market Share
Chemical Disinfectant Segment
1993 1994 1995
Bausch & Lomb 32% 35% 35%
Competitor 1 31% 32% 31%
In these regions, convenience is a major factor driving consumer preference, and
multi-purpose cleaners address this need. Significant opportunities for other
types of lens care solutions also exist in international markets. In response to
those opportunities, a new hydrogen peroxide lens disinfecting product was
launched in Europe in 1995.
The Company will rigorously defend its commanding 30% share of the global lens
care market. This effort will include actions to speed the further development
of markets outside the U.S., as well as continuing programs to maintain
professional support for ReNu multi-purpose solution. This product is the
number-one brand recommended by U.S. eye care professionals. Consumer loyalty to
ReNu multi-purpose solution is currently more than 80%, one of the highest rates
for health and beauty products sold at retail in the U.S.
Oral Care Products
The Interplak line experienced a substantial reduction in revenues for 1995,
particularly in the fourth quarter. A weak retail environment and the arrival of
new competitors were factors. However, operating performance for the oral care
line improved due to a consolidation of operations in Rochester, New York and
other cost reductions. These savings should be fully evident in 1996.
Skin Care Products
In its second full year of marketing, Curel therapeutic moisturizing lotion
achieved 17% revenue growth. Curel lotion's market share rose to a record high
in 1995, becoming one of the most popular brands in the therapeutic segment of
the hand and body lotion market, which is the fastest-growing part of the
overall lotion business. The Curel line was significantly enhanced in 1995 with
the introduction of Curel alpha hydroxy dry skin lotion which met with strong
initial consumer acceptance. Curel lotion's proprietary formulation, which
provides long-lasting, non-greasy moisturizing, is an acknowledged standard for
the effective treatment of dry skin.
1995 Annual Report 19
<PAGE>
The Soft Sense brand, which competes in the
cosmetic segment, is being repositioned with
new graphics and two new products: fragrance
free and alpha hydroxy.
Curel and Soft Sense lotions each
recently introduced a new alpha
hydroxy formula.
Eye Care Products
The Company's eye care products achieved record results in 1995, with revenue
growth exceeding 20%.
Bausch & Lomb's largest eye care product, Moisture Drops lubricant eye drops,
again posted increased revenue growth. Opcon-A eye drops recorded its first full
year of sales in 1995, and generated brisk demand. It was the first
antihistamine/decongestant eye drop to gain FDA approval for the
over-the-counter market, and unit sales exceeded those of all competitors
combined. Since the Company's Opcon-A drops provide relief for itching and
redness caused by ragweed, pollen and animal hair, in 1996 the Bausch & Lomb
Allergy Drops brand will be repositioned under the strong Bausch & Lomb
Sensitive Eyes trademark for the large non-allergy redness relief market.
Opcon-A drops combine the actions of an
ocular decongestant and antihistamine to
relieve itching and redness commonly
associated with ragweed, pollen and animal
hair.
Eye drop products are expected to continue to generate strong sales growth in
1996 and beyond. Over the long term, the Company intends to continue to
introduce superior eye care technology focusing on artificial tears and allergy
relief products.
Over-the-Counter Medications
The OTC medications line consists of analgesics, sedatives, sleep aids, hay
fever remedies, eye drops, food supplements, anti-depressants and nasal
decongestants.
These products are distributed primarily in Germany by the Company's Dr. Mann
Pharma subsidiary. Spurred by strong demand for hay fever and tranquilizer
products, over-the-counter medication sales surpassed expectations with revenues
increasing almost 30% in 1995. Highlights of the year included strong sales of
the Vividrin brand of hay fever products, which increased its market share to a
commanding 64%. Vivimed analgesic also performed well, despite a category sales
decline of 4%. Vivinox sleeping and tranquilizing products, enjoyed strong
growth, as did Viviplus, an anti-depression drug launched in 1995, which
achieved an 18% market share and the category's number-two position in its first
full year of marketing.
The Vivivit family of OTC products
contributed to an increase of nearly
30% in revenues for the Company's line of
over-the-counter medications in 1995.
20 Bausch & Lomb
<PAGE>
THE MEDICAL SECTOR
Contact Lenses
Worldwide sales of Bausch & Lomb contact lenses advanced 14% in 1995. Planned
replacement and disposable lenses paced this revenue growth and achieved a sales
increase of more than 35%. On a geographic basis, total contact lens revenues
outside the U.S. rose 20% over 1994 while sales in the U.S. rose 6% for the
year. Overall, the business operated at a loss, but actions are being taken to
lower costs and improve productivity in future years.
Bausch & Lomb is gaining competitive strength as a low-cost, high-volume
producer. These attributes are critical to success in the rapidly growing
disposable and frequent replacement lens market segment. During 1995, the
Company committed $30 million to install the next generation of soft contact
lens manufacturing technology. This investment followed the completion of the
first phase of a joint development program with IBM. The new technology will
significantly reduce the unit manufacturing cost of the Company's soft contact
lens products and substantially increase its contact lens unit production
capacity.
================================= [PIE CHART] =================================
Geographic Mix Of
Bausch & Lomb's
Contact Lens Revenues
U.S 39%
CANADA & LATIN AMERICA 6%
EUROPE, MIDDLE EAST & AFRICA 22%
ASIA-PACIFIC 33%
================================================================================
================================= [PIE CHART] =================================
Percentage Of Installed Base Of U.S. Wearers
At Year-End 1995 Using Disposable,
Traditional, And Frequent Replacement Lenses
DISPOSABLE 36%
TRADITIONAL 46%
FREQUENT REPLACEMENT 17%
DAILY REPLACEMENT 1%
Source: Bausch & Lomb Estimate
================================================================================
This new manufacturing technology will be used to make Bausch & Lomb's new
high-water SofLens66 contact lens. The SofLens66 contact lens was introduced in
the U.S. in the second half of 1995 and is made from a patented polymer which
provides outstanding visual acuity and comfort. SofLens66 lenses will be
distributed throughout the U.S. in 1996 and are ideal for replacement at
intervals of two weeks or more frequently.
The February 1996 acquisition of Award plc, an innovative low-cost producer of
daily disposable contact lenses, gives the Company an immediate entry into this
quickly emerging market segment. Award has developed a high-volume, short
cycle-time manufacturing technology and a very efficient distribution process
that makes single-use contact lenses affordable for consumers. Expansion of
Award's product distribution throughout Europe and plans to apply for approval
to market the lens in the U.S. are in progress.
The SofLens66 contact lens is made from a
patented new polymer which provides
outstanding visual acuity and comfort.
Optima FW lenses accounted for more than half of the Company's U.S. contact lens
sales in 1995 and achieved strong revenue gains.
Global contact lens sales are well-balanced, with Europe providing about 22%, of
revenues, Asia-Pacific 33% and the U.S. 39%. The international disposable market
is generally at an earlier stage of development than the U.S. and the
1995 Annual Report 21
<PAGE>
Company is focusing on opportunities to rapidly gain market share. The launch of
the Company's SofLens66 product, known as Medalist 66 lenses outside the U.S.,
was expanded in Europe in 1995. Other new product introductions included the
Gold Medalist Toric lens in Europe.
During 1996, sales and profitability for the contact lens business are
anticipated to improve at a good rate as a result of new manufacturing
technologies, new products and the further development of market opportunities
outside the U.S.
Pharmaceuticals
The Company's global pharmaceutical customers include doctors, pharmacists,
hospitals and managed care organizations, to whom patients with a wide range of
eye ailments look for care. Both healthcare providers and patients the world
over trust the Bausch & Lomb and Dr. Mann Pharma names as a source for
high-quality eye care. In 1995, global pharmaceutical revenues approached $100
million, up 28% over the previous year. Operating earnings improved at an even
higher rate. The U.S. accounted for 62% of 1995 sales, with the balance coming
from the Company's Dr. Mann Pharma subsidiary in Germany.
In the U.S., the Company's major products include OptiPranolol, a proprietary
ophthalmic beta-blocker used to treat glaucoma; Muro, a proprietary line of
solutions and ointments used for corneal edema and Levobunolol, a generic
ophthalmic beta-blocker, which was introduced in the first quarter of 1994 and
now has a 50% share of the generic beta-blocker market segment. Crolom, a new
mast-cell stabilizer solution used to treat vernal conjunctivitis, was
introduced in early 1995 and achieved a 35% share of its market. Dr. Mann Pharma
experienced strong revenue growth in 1995 and is the German market leader for
dry eye treatment, ophthalmic antibiotics and red eye treatment products.
New products expected to be launched in 1996 include Lotemax, a proprietary
ophthalmic drug used to treat ocular inflammation and a dry eye ethical
over-the-counter product, Muro Ocugel. This is a modified version of Dr. Mann
Pharma's highly successful product, Vidisic.
Enthusiastic doctor and pharmacist acceptance
of Crolom, OptiPranolol, Muro 128 and
Levobunolol medications contributed to
outstanding sales and earnings growth for the
Company's U.S. pharmaceutical business.
================================= [PIE CHART] =================================
Geographic Mix Of
Bausch & Lomb's
Pharmaceutical Revenues
1995
U.S 62%
NON-U.S 38%
================================================================================
================================= [PIE CHART] =================================
Composition Of U.S. Ophthalmic
Pharmaceutical Market
BETA BLOCKER 26%
MIOTIC/GLAUCOMA 18%
CORTICOIDS 12%
ANTI-INFECTIVES 9%
ARTIFICIAL TEARS 7%
DECONGESTANTS 9%
OTHER 19%
================================================================================
Bausch & Lomb has global capabilities in its pharmaceutical operations that
provide the basis for continued strong growth in sales as well as profitability.
The Company has secured more than 25 abbreviated new drug application (ANDAs)
approvals in the U.S. in the last two years, thus demonstrating an ability to
develop beneficial products and expedite their introduction. In the U.S. and
Europe, it has in place
22 Bausch & Lomb
<PAGE>
over 50 ophthalmic drugs covering all major therapeutic categories. It also has
global sterile manufacturing facilities -- in the U.S., Europe, China and India
- - -- and a well-established global business structure. Presently, the Company has
over 400 product approvals in 73 countries, and more than 40 approvals are
planned in 1996.
Hearing Care
In 1995, the U.S. hearing care market rebounded, growing 8%. Bausch & Lomb's own
Miracle-Ear business, with the strongest brand name in the category, posted a
sales gain of 20%.
New products contributed substantially to the Company's progress, especially the
Mirage line, a very small hearing aid which fits deep within the ear canal. The
Bausch & Lomb programmable hearing aid, launched in the second quarter, gained
increasing acceptance as the year progressed. Both of these high-margin products
are expected to build on their initial success, helping to sustain the positive
sales and earnings trends begun in 1995.
New products scheduled for introduction in 1996 will enable Miracle-Ear hearing
aids to comfortably fit a larger population of potential users. They will
include new circuitry options that rank with the most advanced in the hearing
aid field.
Small in-the-canal hearing aids and new
programmable models are earning an
enthusiastic reception among consumers.
Dental Implants
Revenues for Steri-Oss dental implants and instruments rose more than 20% over
1994 and market share increased despite intensified global competition. The
Company is a leading producer of prosthetic and restorative dental work
products, primarily jaw anchors for artificial teeth that replace those lost to
disease or accident. Several important new products reached the market in 1995,
including the Bio-Esthetic Abutment System that anatomically shapes the implant
for a more esthetically pleasing result. Steri-Oss also established new
distribution in Israel and obtained a number of approvals for sale of its
products in Japan. The Bio-Esthetic line will be a primary focus of the Company
in 1996.
THE BIOMEDICAL SECTOR
Consolidated revenues for the biomedical sector increased 7% over 1994, and both
the profitability and cash flow of this business remained strong.
Research Animals
Charles River Laboratories currently commands more than 40% of the worldwide
market for purpose-bred rodents used in biomedical research. With an
international technical staff of over 50 veterinarians and PhDs, Charles River
is uniquely positioned to respond to more demanding customer requirements in the
animal business. These include the testing of new pharmaceutical compounds on
rodent models, the characterization and mass production of enhanced rodent
research models, and serving as an international outsourcing alternative to
pharmaceutical and biotechnology companies which are increasingly committed to
transitioning their animal studies to a qualified service provider. For example,
Charles River currently is injecting human tumors provided by a pharmaceutical
customer into a special strain of rodents, applying therapeutic compound
candidates and reporting data back to the customer.
Global ISO 9000 certification is another major advance in Charles River's
program to standardize product quality across the world. In keeping with its
goal of offering customers an "International Standard" product that remains
consistent and reliable over time and geography, Charles River
1995 Annual Report 23
<PAGE>
continues to position itself as the only truly global provider in its industry.
Future trends in the mix of product sales should continue to reflect increasing
demand for specialized high-value rodent models, such as immunocompromised mice
used in AIDS research. However, the overall rodent business is not planned for
high growth. Today, sales of laboratory animals represent approximately 85% of
total biomedical product sales. This percentage is expected to decline each
year, offset by the very rapid emergence of a new family of Charles River
products and services based on emerging biomedical technologies.
Biomedical Products And Services
One example of Charles River's emerging focus on biomedical products is the
Endosafe line of endotoxin test kits. These kits are used to test for
bacterial contamination in injectable drugs and invasive devices as part of
the manufacturing quality control regimen mandated by the FDA. Endosafe
manufactures the Limulus Amebocyte Lysate Assay, the only in vitro
endotoxin test approved by the FDA, and its revenues grew more than 80% during
1995.
Charles River is also the world's largest producer of specific pathogen-free
eggs, used principally in the production of poultry vaccines. Demand for these
products is being fueled by a global increase in consumer demand for poultry
products. Revenue gains in this area exceeded 20% in 1995.
Continued progress was attained on collaborative efforts with BioTransplant,
Incorporated, based on a program through which organs from a special strain of
inbred swine (produced exclusively by Charles River) will be made available for
xenotransplantation, or transplantation across species. This is an undeveloped
market estimated to have a potential value of more than $1 billion within the
next decade. The goal of the BioTransplant/Charles River project is to develop a
scientific protocol so that swine can become a source of hearts, kidneys, livers
and other organs for human transplantation in response to the insufficient
availability of suitable human organs. This would be made possible through the
combined utilization of Charles River's specialty swine and BioTransplant's
proprietary portfolio of methods and products designed to selectively inhibit
and modify a patient's immune system so that it will accept foreign organs
through a technique known as "specific immune tolerance." If this collaborative
effort is successful, organ recipients will no longer be required to remain on
powerful immunosuppressive drugs for the rest of their lives. Although there are
18,000 organ transplants performed in the U.S. each year, a qualified U.S.
patient population of over 40,000 are awaiting donor organs.
Charles River is the world's largest
manufacturer of specific pathogen-
free eggs.
Charles River's prospects for further growth in 1996 remain excellent, with the
potential to further leverage expected sales gains through the acquisition of
new biomedical product lines. Charles River continues to focus on growing its
portfolio of services in anticipation of increasing worldwide outsourcing demand
by the pharmaceutical industry. Experience and technology, an international
presence, and an established reputation as an industry leader positions Charles
River globally as a unique product and service provider.
================================= [PIE CHART] =================================
Geographic Mix Of Bausch & Lomb's
1995 Biomedical Revenues
U.S 40%
CANADA & LATIN AMERICA 3%
EUROPE, MIDDLE EAST & AFRICA 31%
ASIA-PACIFIC 26%
================================================================================
24 Bausch & Lomb
<PAGE>
The Optics Segment
================================================================================
THE OPTICS SEGMENT FIVE-YEAR SUMMARY OF RESULTS
Dollars In Millions 1991 1992 1993 1994 1995
Net Sales $576.3 657.9 660.9 642.8 573.4
Business Segment
Earnings $137.9 135.5 79.6* 72.1 42.3**
Net Sales*** $522.8 586.6 561.5 531.8 555.1
Business Segment
Earnings*** $134.9 129.9 71.6* 61.7 43.6**
* Includes restructuring and special charges of $32.9 million.
** Includes restructuring charges of $15.8 million.
*** From continuing operations.
================================================================================
Optics segment revenues for continuing product lines rose 4% in 1995. Sunglass
products, led by the RAY-BAN line, achieved a 6% growth in sales as new designs
met with very enthusiastic market acceptance. Segment earnings were depressed by
a charge to restructure manufacturing operations.
Sunglasses
Worldwide sunglass revenues rose 6% over 1994 as the Company responded to major
shifts in consumer styling preference and the continued surge in demand for
sports-related sunglasses. Bausch & Lomb, with a global market share
approximating 43%, originally built its worldwide leadership on the classic
appeal of its Ray-Ban Wayfarer sunglasses and Aviator models. Recently, however,
the market for premium-price eyewear has changed dramatically with sales of
these classic models lagging behind new, fast-growing contemporary and sport
segments of the sunglass category. Accordingly, the Company has been
aggressively shifting its priorities, leveraging its global brands, market
expertise and existing infrastructure to bring new lines and products to market.
Both the challenge and the potential of the evolving sunglass category are
considerable. The global market is expected to grow at a compound rate of 8-10%
over the next several years, paced by strong double-digit growth in Asia and
Latin America compared to more modest single-digit growth expectations in North
America and Europe. Distribution is shifting away from traditional channels,
like optical outlets and department stores, to specialty stores. This shift is
readily apparent in the U.S., where premium priced sunglasses sold through
traditional outlets have steadily dropped, while specialty stores now have the
largest market share with more than 30% of retail sales. The same shift is
expected to gain momentum worldwide.
Revo created and leads the fast-growing
ultra-premium sunglass category. Half of
Revo's 1996 sales are expected to come from
products introduced since 1992.
In another critical market shift, the majority of sunglass consumers -- 61% --
are now 16-34 years of age, a trend-conscious group committed to
self-expression. They are driving category growth and are eager to experiment
with new styles and brands.
================================= [PIE CHART] =================================
Share Of Global Sunglass Market
BAUSCH & LOMB 43%
DE RIGO 7%
OAKLEY 11%
LUXOTTICA 6%
CORNING 2%
OTHER 31%
Source: Bausch & Lomb Estimate
================================================================================
Bausch & Lomb's strategy to tap into these trends incorporates aggressive new
product introductions, strong new product advertising to consumers, new
merchandising materials to increase brand awareness in stores and faster product
development and delivery.
A major benchmark of Bausch & Lomb's success will be increased sales from new
products. Consumer interest in new types of sunglasses is clear: For example,
half of the Revo line's sales for
Ray-Ban Sidestreet sunglasses were
one of the Company's most successful products in 1995.
1995 Annual Report 25
<PAGE>
================================= [PIE CHART] =================================
Geographic Mix Of
Bausch & Lomb Sunglass Revenues
U.S 47%
CANADA & LATIN AMERICA 10%
EUROPE, MIDDLE EAST & AFRICA 25%
ASIA-PACIFIC 18%
================================================================================
1996 are expected to come from products introduced since 1992, and 20% are
expected to come from new 1996 products. Overall, the Company is aiming to
triple the portion of total sunglass sales usually derived from new products
introduced in the last two years to 40% by the end of 1996.
Distribution is expected to widen substantially into new global markets.
Numerous new Ray-Ban designs will be launched globally in 1996; countries where
Liz Claiborne sunglasses are sold will be expanded from three to 20 in 1996; and
Killer Loop sunglasses, currently limited to the U.S. and Canada, will expand
throughout Europe and Asia and reach 18 countries by the end of 1996.
New product development will generally pursue innovative design and
technological improvements. For example, a new polycarbonate lens incorporates
Revo's classic lens technology by using stacked thin-film coating to block
ultraviolet light and control both infrared and short-wave blue light.
Innovative products will also spur the Company's entry into new markets,
particularly for the Ray-Ban and Killer Loop lines where design and technology
are driving efforts to reach the growing youth market. To fill gaps in its
portfolio of brands the Company is exploring suitable acquisitions. This was
illustrated by the recent acquisition of Arnette Optic Illusions, an action that
brings to Bausch & Lomb one of the fastest growing sunglass brands targeted at
the exploding market for sports-related products.
Ray-Ban xrays sunglasses feature the first
polycarbonate lenses worthy of the Ray-Ban
name and deliver the impact- and
scratch-resistance serious athletes demand.
To provide more reliable and cost-effective global product delivery, the Company
is restructuring its manufacturing operations and establishing three product
supply centers. Each will integrate core Bausch & Lomb technical processes,
product fabrication and assembly, and distribution and logistics processes. In
addition, vendor relationships are being examined to improve the Company's
overall product delivery, and processes are being streamlined to reduce costs.
These actions will enhance our responsiveness to market demand and should boost
sunglass profitability in the future.
Liz Claiborne sunglasses will be sold in
20 countries in 1996, up from only three
countries in 1995.
Optical Thin Films
For 1995, revenues from the optical thin film technology business declined 8%.
This was primarily attributable to a change in requirements by a major customer
in Europe. The Company's business continues to be comprised primarily of
coatings provided to display lamp manufacturers, a segment where Bausch & Lomb
is the global market share leader.
The Company has begun to diversify beyond its core general lamp business,
recently introducing high-quality coatings for theatrical and medical lights,
both of which exceeded their 1995 sales targets. Late in 1995, the Company
introduced its Marathon brand of scratch-resistant, anti-reflective coatings for
prescription lenses which it expects will provide significant sales growth in
1996 and beyond.
26 Bausch & Lomb
<PAGE>
Financial Section
- - --------------------------------------------------------------------------------
REPORT OF
MANAGEMENT
The following financial statements of Bausch & Lomb Incorporated were prepared
by the Company's management, which is responsible for their reliability and
objectivity. The statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgments of management with consideration given to materiality.
Financial information elsewhere in this annual report is consistent with that in
the financial statements.
Management is further responsible for maintaining a system of internal
controls to provide reasonable assurance that Bausch & Lomb's books and records
reflect the transactions of the Company; that assets are safeguarded; and that
its established policies and procedures are followed. Management systematically
reviews and modifies the system of internal controls to improve its
effectiveness. The internal control system is augmented by the communication of
accounting and business policies throughout the Company; the careful selection,
training and development of qualified personnel; the delegation of authority and
establishment of responsibilities; and a comprehensive program of internal
audit.
Independent accountants are engaged to audit the financial statements of
the Company and issue a report thereon. They have informed management and the
audit committee that their audits were conducted in accordance with generally
accepted auditing standards which require a review and evaluation of internal
controls to determine the nature, timing and extent of audit testing. The Report
Of Independent Accountants is on page 65 of this report.
The recommendations of the internal auditors and independent accountants
are reviewed by management. Control procedures have been implemented or revised
as appropriate to respond to these recommendations. In management's opinion, as
of December 30, 1995, the internal control system was functioning effectively
and accomplished the objectives discussed herein.
/s/ William H. Waltrip /s/ Stephen C. McCluski
William H. Waltrip Stephen C. McCluski
Chairman and Senior Vice President
Chief Executive Officer Finance
REPORT
OF THE AUDIT
COMMITTEE
The audit committee of the board of directors is comprised of three outside
directors. The members of the committee are: Kenneth L. Wolfe, Chairman; Linda
Johnson Rice; and Alvin W. Trivelpiece, Ph.D. The committee held six meetings
during 1995.
The audit committee meets with the independent accountants, management
and the internal auditors to provide reasonable assurance that management
fulfills its responsibilities in the preparation of the financial statements and
in the maintenance of an effective system of internal controls. The audit
committee reviews the performance and fees of the independent accountants,
recommends their appointment and meets with them and the internal auditors,
without management present, to discuss the scope and results of their audit
work. Both the independent accountants and the internal auditors have full
access to the audit committee.
/s/ Kenneth L. Wolfe
Kenneth L. Wolfe
Chairman
Bausch & Lomb Incorporated and Consolidated Subsidiaries 27
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
This financial review, which should be read in conjunction with the accompanying
financial statements, contains management's discussion and analysis of the
Company's results of operations, liquidity and progress toward stated financial
objectives.
As more fully described in Note 2 - Restatement Of Financial
Information, 1993 and 1994 financial information contained herein has been
restated. This reflects the decision to account for shipments under a fourth
quarter 1993 U.S. contact lens distributor program as consigned inventory and to
record revenues when the products were sold by the distributors to their
customers and to reverse the effect of subsequent product returns and pricing
adjustments related to this program which had been previously recognized in
1994. Additionally, a restatement was made to correct the improper recording of
certain 1993 sunglass distributor sales in Southeast Asia and to reverse related
sales returns which had been previously recorded in 1994.
RESULTS OF
OPERATIONS
Bausch & Lomb strives to maximize total return to shareholders through a
combination of long-term growth in share price and the payment of cash
dividends. Although dividends have risen at a compound annual rate of 9% over
the most recent five-year period, total return to shareholders in 1994 and 1995
was impacted by a decline in the Company's stock price stemming from the
operational issues and other factors discussed in this review.
The Company systematically measures its financial progress against the
Standard & Poors Healthcare Composite Group, with the goal of placing Bausch &
Lomb among the top performers for each of its selected financial objectives. To
achieve this goal, the Company has established multi-year objectives of compound
annual sales and earnings growth in the range of 10% and, on a longer term
basis, a return on equity of approximately 20%. The Company also emphasizes the
need for operational stability, predictability and profitability. The Company's
management team is firmly committed to achieving these performance objectives on
a going-forward basis.
Comparability Of Business Segment Information An analysis of the Company's
operating results requires the consideration of certain significant events as
described below.
In December 1995, the Company's board of directors approved plans to
restructure portions of the sunglass, biomedical and contact lens operations as
well as certain corporate administrative functions and a pre-tax restructuring
charge of $27 million was recorded. The major components of this restructuring
charge are described more fully in Note 3 - Restructuring Charges. These actions
are expected to contribute savings of $9 million in 1996 and $24 million on an
annualized basis thereafter.
As announced on May 1, 1995, the Company completed the sale of its
Sports Optics Division, which marketed binoculars, riflescopes and telescopes.
Current year results reflect the operations of this business for only three
months. The sports optics business contributed approximately $18 million, $111
million and $99 million in optics segment revenues in 1995, 1994 and 1993,
respectively. Operating earnings from this business were breakeven in 1995, $10
million in 1994 and $8 million in 1993.
In December 1994, decisions were made fundamentally realigning global
oral care operations, including centralizing management and redirecting most
non-U.S. operations to selected distributors. These decisions were based on
increased competition, a significant decline in market share and operating
losses which greatly reduced estimated future cash flows for this business. They
also reflected the Company's belief that future strategic investments in its
core and emerging businesses would provide higher long-term shareholder returns.
As a result, the Company recognized a goodwill impairment charge of $75 million
with no associated tax benefit. In determining the amount of the impairment
charge, the Company developed its best estimate of operating cash flows over the
remaining business life cycle, assumed to be 14 years. Future cash flows,
excluding interest charges, were discounted using an estimated 8.6% incremental
borrowing rate.
28 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
In the fourth quarter of 1993, the Company announced plans to
restructure its sunglass, pharmaceutical and biomedical operations and recorded
a pre-tax restructuring charge of $50 million. All actions contemplated at the
time of establishing the charge have been completed and no accruals remain as of
December 30, 1995. The Company estimates that savings realized from these
actions were approximately $20 million in 1995.
Operating Results By Business Segment Bausch & Lomb's operating results are
reported in two business segments, healthcare and optics. The healthcare segment
includes personal health, medical and biomedical products. In the personal
health sector, the Company's principal lines include contact lens care products,
eye care solutions, over-the-counter medications, skin care products and oral
care products. Medical sector lines include contact lenses and lens materials,
prescription pharmaceuticals, hearing aids and dental implants. Biomedical
sector lines include purpose-bred laboratory animals for biomedical research,
specific pathogen-free eggs for vaccine production and a variety of biotechnical
and professional services provided to the scientific research community. These
products accounted for 70% of the Company's reported 1995 revenues and 84% of
its reported business segment earnings. Principal lines of business in the
optics segment include sunglasses and optical thin film coating services and
products. This segment also includes results from the Company's divested sports
optics business. Optics segment products accounted for 30% of the Company's
reported revenues and 16% of its reported business segment earnings. Absent
restructuring charges, the optics segment would have contributed earnings that
were more proportional to its share of total sales.
The Company's reported results for the three-year period discussed in
this review include the effect of the significant events described previously. A
summary of sales and earnings by business segment, corporate administration
expense and operating earnings, and comparable basis results which exclude the
divested sports optics business and the costs associated with the restructuring
and goodwill impairment charges described above follows:
<TABLE>
<CAPTION>
1995 1994* 1993*
- - ----------------------------------------------------------------------------------------------------------------------------
Comparable Comparable Comparable
Dollar Amounts In Millions As Reported Basis As Reported Basis As Reported Basis
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
Healthcare $1,359.5 $1,359.5 $1,249.9 $1,249.9 $1,169.2 $1,169.2
Optics 573.4 555.1 642.8 531.8 660.9 561.5
- - ----------------------------------------------------------------------------------------------------------------------------
Total $1,932.9 $1,914.6 $1,892.7 $1,781.7 $1,830.1 $1,730.7
============================================================================================================================
EARNINGS:
Healthcare $229.2 $237.1 $91.5 $166.5 $192.3 $208.2
Optics 42.3 59.5 72.1 61.7 79.6 104.5
- - ----------------------------------------------------------------------------------------------------------------------------
Business segment earnings 271.5 296.6 163.6 228.2 271.9 312.7
Corporate administration expense 60.9 57.9 43.8 43.8 47.0 45.8
- - ----------------------------------------------------------------------------------------------------------------------------
Operating earnings $210.6 $238.7 $119.8 $184.4 $224.9 $266.9
============================================================================================================================
</TABLE>
*Amounts presented in this table and in all subsequent discussions have been
restated for certain items as more fully described in Note 2 - Restatement Of
Financial Information.
The discussion of results which follows focuses on the comparable basis
operating performance and trends.
Net Sales Consolidated reported revenues of $1,933 million in 1995 increased $40
million or 2% over 1994. Favorable exchange rate changes increased sales in U.S.
dollars by $58 million or 3%. In 1994, reported revenues increased $62 million
or 3% over 1993, including the favorable effect of changes in currency exchange
rates which increased sales in U.S. dollars by $6 million.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 29
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
Comparable consolidated revenues totaled $1,915 million in 1995, an
increase of $133 million or 7% from 1994. In 1994, sales increased $51 million
or 3% on a comparable basis from 1993. Consolidated reported revenues have
increased at compound rates of 4% and 7% for the most recent three- and
five-year periods, respectively. On a comparable basis, these rates were 6% and
8%, respectively.
Business Segment And Operating Earnings Business segment earnings of $272
million in 1995 improved $108 million or 66% from 1994 and operating earnings of
$211 million increased $91 million or 76% from the prior year period.
Fluctuations in foreign currency exchange rates improved operating earnings
comparisons to 1994 by approximately $8 million or 7%. On a comparable basis,
business segment earnings of $297 million for 1995 improved $68 million or 30%
from 1994, and operating earnings totaled $239 million, an increase of $54
million or 29% from the prior year period. The ratio of business segment
earnings to sales was 15.5% in 1995 versus 12.8% in 1994 and 18.1% in 1993.
Business segment earnings in 1994 totaled $164 million, a decline of
$108 million or 40% from 1993. Fluctuations in foreign currency exchange rates
had virtually no net impact on 1994 business segment earnings versus the prior
year. On a comparable basis, business segment earnings for 1994 totaled $228
million, a decline of $84 million or 27% from 1993. Operating earnings were $120
million in 1994, a decrease of $105 million or 47% from 1993. On a comparable
basis, operating earnings of $184 million in 1994 decreased $82 million or 31%
from 1993. As reported, three-year annual compound growth for segment earnings
has been negative and five-year compound annual growth was 1%. On a comparable
basis, three-year compound annual growth has been negative, while five-year
compound annual growth was 3%.
Healthcare Segment Results Healthcare segment revenues advanced $110 million or
9% over 1994 to $1,359 million. In 1994, healthcare segment revenues advanced
$81 million or 7% over 1993. Major product sector revenues as a percentage of
total segment sales are presented in the following table:
Healthcare Segment Sales By Product Sector
1995 1994 1993
- - -------------------------------------------------------
Personal health 50% 53% 53%
Medical 36% 33% 33%
Biomedical 14% 14% 14%
=======================================================
1995 Versus 1994 Within the personal health sector, 1995 revenues improved 4%
from the comparable 1994 level. The Company's lines of soft lens care solutions,
including the ReNu brand, advanced more than 10% in non-U.S. regions. However,
in the U.S., soft lens care revenues decreased 4%. The Company believes this
decline is attributable to a trend toward lower retail inventory levels and a
reduction in dedicated shelf space in the saline segment of this market.
Revenues for the Company's lines of rigid gas permeable (RGP) solutions advanced
at double-digit rates in most geographic areas and reflect revenues from new
products, including Boston Simplicity and an improved formula Boston Advance.
Skin care revenues advanced 6% during the year and included results for the
recently introduced Curel Alpha Hydroxy product line. Eye care products in the
U.S. attained a 22% increase in sales, benefiting from increased sales of
Opcon-A, an antihistamine/decongestant introduced in the fourth quarter of 1994,
which has achieved a significant market position. The Company's line of European
over-the-counter pharmaceuticals achieved a double-digit increase over 1994
driven by strong performance of hayfever medications and sleeping aids, as well
as analgesic and nutraceutical products, including the fourth quarter launch of
Vivivit Multi. Revenues for consumer oral care products were nearly 30% below
1994 as shipments of Interplak power toothbrushes declined in the U.S., Germany
and Canada. This business has been impacted by intense competition, and during
1996 the Company's board of directors authorized management to explore the
possible divestiture of the Interplak line. Also contributing to oral care
product sales shortfalls was the discontinuation of a line of mouthwash in the
U.S.
30 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
Medical sector sales rose 18% from comparable 1994 levels. Worldwide
contact lens revenues advanced 14%, led by a 38% increase in sales of planned
replacement lens products, most notably in the U.S., Europe and Asia-Pacific
regions. Sales of traditional contact lenses increased significantly in Japan.
However, sales for these products decreased 17% in the U.S. and were relatively
even with 1994 in other geographic areas, reflecting a general market trend and
the Company's strategic shift in focus toward planned replacement lenses. This
was clearly evidenced in 1995, when revenues for planned replacement lenses
equaled those for traditional lenses for the first time. Worldwide revenues for
RGP lenses and lens materials improved 10% and included sales of the new Boston
7 and Boston ES lens materials. Worldwide ophthalmic pharmaceutical revenues
improved 28%. Within the U.S., these results were attributable to the success of
recently introduced products, including Tobramycin, a generic version of Tobrex,
Levobunolol, a generic version of Betagan, and Crolom, which is indicated for
vernal keratoconjunctivitis, an allergic eye condition. Revenues for
prescription pharmaceuticals in Europe also advanced from the prior year.
Increased demand was also noted for the Company's lines of dental implants and
hearing aids. Hearing aid revenues rose 20% in response to improved overall
market conditions and encouraging consumer demand for the recently introduced
Mirage completely in-the-canal product and a new line of programmable hearing
aids.
A 7% improvement in the Company's biomedical sector reflected increased
shipments of specific pathogen-free eggs and toxicology products, as well as the
favorable impact of foreign currency rate fluctuations on animal operations
outside the U.S.
Reported healthcare segment earnings of $229 million advanced $138
million as compared to the 1994 level of $92 million. Operating margins in the
healthcare segment were 16.9% in 1995, 7.3% in 1994 and 16.4% in 1993. On a
comparable basis, healthcare segment earnings of $237 million in 1995 increased
$71 million or 42% from 1994, and operating margins were 17.4% in 1995, 13.3% in
1994 and 17.8% in 1993. The results for 1995 reflect significantly reduced
operating losses for planned replacement lens products and hearing aids, due to
the margin impact of higher sales as well as decreased spending for advertising
and selling. Improved results were also noted for prescription pharmaceuticals,
reflecting the margin impact of strong sales growth. Oral care products
continued to incur operating losses in 1995, however results improved from 1994,
reflecting the positive impact of a centralization of the global management of
the Interplak business during 1995, as well as lower advertising, selling and
research and development expenses. In 1994, higher levels of expenses were
incurred in support of the development and launch of the new technology power
toothbrushes.
1994 Versus 1993 Within the personal health sector, 1994 revenues for lens care
products advanced 10% from 1993, based primarily on higher unit shipments.
Continued strong demand for the Company's ReNu, Boston and Bausch & Lomb lines
of lens care solutions was reflected in improved results worldwide. Results also
benefited from a full year of sales of Curel and Soft Sense skin care products.
Additionally, over-the-counter medications in Europe achieved 18% growth as a
result of successful new product introductions. Worldwide oral care revenues
declined 28% from 1993. Increased competition in the U.S. market led to price
reductions and lost market share for the Interplak line of power toothbrushes.
Revenues for the Company's Clear Choice mouthwash declined from 1993 based on
heightened competition and a change in business strategy.
Medical sector revenues increased 7% from 1993. Worldwide ophthalmic
pharmaceutical revenues improved 18%, led by results for products in the U.S.,
including Tobramycin and Levobunolol. Growth was also evidenced in Europe,
indicating a stabilization of the German market following regulatory changes
made in 1993. Medical sector results further benefited from a full year's sales
of Steri-Oss dental implants and Miracle-Ear hearing aids, both acquired in
1993. However, overall sales levels for hearing aids were disappointing,
consistent with industry trends in response to FTC and FDA initiatives. The
Company took several actions in 1994 to address these concerns, and fourth
quarter sales momentum improved as consumers responded positively to
Bausch & Lomb Incorporated and Consolidated Subsidiaries 31
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
advertising for the Mirage hearing aid. Sales of disposable and planned
replacement lenses advanced 6% over 1993, reflecting improvement in non-U.S.
markets. The Company's overall share of the highly competitive U.S. market for
these lens products is estimated to have remained even with the prior year. The
U.S. launch of the Occasions multi-focal lens in 1993 proved to be unsuccessful,
as practitioner fit rates were lower than expected. Returns of this product, net
of recorded reserves, exceeded shipments in 1994. Revenues for the SeeQuence 2
lens showed good improvement. Sales of disposable and planned replacement lenses
outside the U.S., particularly in the Asia-Pacific region and Europe, increased
more than 50% over 1993. Traditional lens sales decreased moderately from 1993
reflecting weakened economic conditions in key Latin American markets and a
continuing shift in consumer demand from traditional lenses toward disposable
and planned replacement lenses. Additionally, in 1994 the Company agreed on a
one-time basis to accept returns of traditional contact lenses, primarily
consigned product from an unsuccessful 1993 fourth quarter program, and to
provide price adjustments to distributors.
Modest gains in the biomedical sector reflected the favorable effect of
foreign currency rate fluctuations on the results of non-U.S. operations,
increased shipments of specific pathogen-free eggs and incremental revenues from
a line of diagnostic products acquired in the 1994 first quarter.
Reported healthcare segment earnings of $92 million in 1994 declined
$101 million or 52% from 1993. On a comparable basis, healthcare segment
earnings in 1994 declined $42 million or 20% from 1993. 1994 results include
global operating losses for contact lenses, reflecting the costs of efforts in
the U.S. to reduce levels of contact lens inventories at distributors,
unfavorable manufacturing variances associated with the resulting lower
manufacturing volumes, as well as repackaging and obsolescence provisions
recorded for product returns from an unsuccessful fourth quarter 1993 marketing
program. In addition, this business continued to experience a shift in consumer
demand toward lower margin disposable and planned replacement products. Results
also included the effect of returns of Occasions multi-focal lenses and costs
for strategic investment in new technology in the U.S. and Ireland required to
manufacture low cost, high quality products in volumes that will allow this
business to become profitable in the future. Operating losses for oral care
products reflected the impact of reduced pricing to meet competition and
incremental support for the launch of new technology products. Operating losses
of $12 million were incurred in the hearing care business in 1994 based on
reduced sales levels and investments to restore consumer confidence in this
product category and to introduce new products and consumer assurance programs.
These actions followed heightened regulatory oversight of the industry by the
FTC and FDA. Results also included the cost of expanded support for
Miracle-Ear's franchised dealers. Positive factors in healthcare segment
earnings performance in 1994 included increased demand for higher margin lens
care products, improved profitability for pharmaceuticals, including the savings
realized from a successful restructuring of U.S. operations, and gains in demand
for dental implants.
Optics Segment Results
1995 Versus 1994 Reported optics segment revenues of $573 million declined $69
million or 11% from 1994. Comparable optics segment revenues grew $23 million or
4% in 1995 to $555 million as compared with 1994. Almost 15% of sunglass
revenues resulted from new products, including Orbs, Predator, Side Street,
Killer Loop Activ and new offerings in the Revo Shapes and Traveler collections.
Sales of these products more than offset a decline in demand for certain Ray-Ban
sunglasses with more traditional designs. These positive results were attained
during a period in which this business was actively engaged in programs to
develop flexible manufacturing processes for its new products. As a result, the
Company was not able to fully meet the demand created by strong global consumer
acceptance of new designs. Many of these new sunglass products are in the
fashion and sport segments, areas where the Company is expanding its market
presence. Products in these
32 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
segments are subject, in part, to the ability to anticipate and satisfy changes
in consumer preferences and are generally characterized by shorter life cycles.
Being successful in these categories generally requires innovative design and
marketing expertise, combined with flexible product delivery capabilities.
Reported optics segment earnings of $42 million were $30 million or 41%
lower than the 1994 amount of $72 million. Reported optics segment margins were
7.4%, 11.2% and 12.0% in 1995, 1994 and 1993, respectively. On a comparable
basis, optics segment earnings of $59 million in 1995 were $2 million or 3%
lower than comparable 1994 results, and optics segment margins were 10.7% in
1995, 11.6% in 1994 and 18.6% in 1993. These results reflect the shift in
product mix toward lower-margin fashion-oriented new sunglass styles.
Additionally, advertising expenses increased in response to the Company's
intensified efforts to build consumer awareness of Ray-Ban and other brand names
around the world. These margins are expected to improve in the short term as a
result of new manufacturing strategies and actions to reduce overhead and
administrative costs. Segment results also include earnings declines in the thin
film technology business, which resulted from increased competition and lower
sales to European customers.
1994 Versus 1993 Reported optics segment revenues of $643 million in 1994
declined $18 million or 3% from 1993. On a comparable basis, 1994 optics segment
revenues declined $30 million or 5% to $532 million. These results reflected
actions to normalize sunglass distributor inventory levels globally. Sales were
also hindered by a general trend toward lower retail and distributor inventories
in the wake of a tightening of the Company's worldwide marketing and sales
policies. In the U.S., these trends were partially offset by incremental results
from the first quarter acquisition of the Revo line of premium-priced
sunglasses. Sales of thin film coating products and services advanced 15% as a
result of higher shipments to Europe, which accounts for approximately half of
this business.
Reported optics segment earnings of $72 million declined $8 million or
9% from 1993. On a comparable basis, optics segment earnings of $62 million in
1994 were $43 million or 41% below 1993 levels. 1994 results included the impact
of sales declines and lower manufacturing volumes on the worldwide sunglass
business as well as actions taken to realign or discontinue distributor
relationships in Asia. Partially offsetting these negative factors were
incremental earnings from the acquisition of the Revo sunglass line.
Costs And Expenses On a comparable basis, the ratio of cost of products sold to
sales was 44% in 1995, compared to 48% in 1994 and 45% in 1993. The improvement
is due to shifts in sales mix toward higher-margin hearing aids and
pharmaceutical products as well as the divestiture of the sports optics business
and the favorable impact of foreign currency exchange rate changes. These trends
more than offset the impact of increased demand for lower-margin planned
replacement lenses and new sunglass products.
The unfavorable ratio in 1994 resulted from product mix, including lower
sales of traditional contact lenses and Ray-Ban sunglasses, which have
historically contributed a higher return on sales, and the effect of lower
manufacturing volumes on contact lens and sunglass product costs. These business
developments more than offset the increase in sales of higher-margin lens care
and skin care products and the improvement in margins for U.S. pharmaceutical
operations resulting from the success of new product introductions and
restructuring actions.
Comparable selling, administrative and general expenses, including
corporate administration costs, were 40% of sales in 1995, 38% of sales in 1994
and 37% of sales in 1993. Advertising and promotion expenses included in this
total were 18%, 17% and 16% of sales in 1995, 1994 and 1993, respectively. The
increases reflect promotional support for the launch and test marketing of
several new products as well as a refocusing of advertising toward consumers.
Higher levels of advertising and promotion spending in 1995 included additional
support for Ray-Ban sunglasses in key markets, skin care product advertising and
the establishment of a business development marketing program directed toward
contact lens patients. Corporate administration expenses totaled $58 million in
1995, compared to $44 million in 1994 and $47 million in 1993. This represented
3.0% of sales
Bausch & Lomb Incorporated and Consolidated Subsidiaries 33
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
in 1995, 2.3% in 1994 and 2.5% in 1993. 1995 corporate administration expenses
included a $7 million pre-tax charge in December 1995 for retirement and other
benefits for the Company's former Chief Executive Officer. Excluding this
charge, 1995 corporate administration expenses would have been 2.6% of sales.
Research and development expenditures totaled $66 million in 1995
compared to $60 million in 1994, an increase of 9%. These costs were $58 million
in 1993. Research and development costs have risen at a compound rate of 6% over
the past five years. The Company continues to invest in programs to enhance its
technical leadership in all of its key businesses. The majority of these
expenditures in 1995 related to the development of contact lens materials, lens
care solutions, ophthalmic pharmaceuticals and sunglasses.
Operating Results By Geographic Region The Company's reported results by
geographic region for all three periods were affected by the significant events
described previously. A summary of sales and earnings by geographic region and
comparable results which exclude the divested sports optics business and the
costs associated with the restructuring and goodwill impairment charges are
summarized below:
<TABLE>
<CAPTION>
1995 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------
Comparable Comparable Comparable
Dollar Amounts In Millions As Reported Basis As Reported Basis As Reported Basis
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
Europe, Middle East & Africa $471.0 $469.9 $414.2 $410.5 $396.9 $393.5
Asia-Pacific 345.3 345.0 303.7 302.2 292.2 290.4
Canada & Latin America 119.0 116.2 129.5 117.2 128.3 117.1
U.S. 997.6 983.5 1,045.3 951.8 1,012.7 929.7
- - -------------------------------------------------------------------------------------------------------------------------
Total $1,932.9 $1,914.6 $1,892.7 $1,781.7 $1,830.1 $1,730.7
=========================================================================================================================
BUSINESS SEGMENT EARNINGS:
Europe, Middle East & Africa $93.1 $96.6 $91.9 $91.6 $90.0 $106.3
Asia-Pacific 43.6 43.7 29.9 29.8 17.7 22.2
Canada & Latin America (2.0) (1.7) 6.5 5.3 10.2 13.3
U.S. 136.8 158.0 35.3 101.5 154.0 170.9
- - -------------------------------------------------------------------------------------------------------------------------
Total $271.5 $296.6 $163.6 $228.2 $271.9 $312.7
=========================================================================================================================
</TABLE>
The following discussion addresses trends noted on a comparable basis.
Sales in markets outside the U.S. totaled $931 million in 1995, an
increase of $101 million or 12% from 1994, and represented 49% of consolidated
revenues, compared to 47% in 1994 and 46% in 1993. European revenues increased
14% and benefited from the favorable impact of currency movements, particularly
in Germany. This progress also reflected improved demand for the Company's
sunglasses, over-the-counter medications, planned replacement lenses and lens
care products. Sales advanced 14% in the Asia-Pacific region, primarily due to
results in Japan, attributable to favorable currency exchange rate fluctuations,
as well as increased sales of sunglasses, contact lenses and lens care products.
Elsewhere in that region, revenues were essentially even with 1994, as sales
increases for planned replacement lenses and lens care solutions and favorable
foreign currency rate fluctuations were offset by sales declines for sunglasses.
Revenues decreased slightly in the Canada and Latin America region. Sales
shortfalls in Mexico more than offset improvement in Brazil and Canada, where
sales improved due to results for sunglasses and contact lenses.
34 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
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Business segment earnings in 1995 in markets outside the U.S. were $139
million, an increase of $12 million or 9% over 1994. This represented 47% of
total business segment earnings in 1995, 56% in 1994 and 45% in 1993. The
increase over comparable basis 1994 results reflected improvements in Japan
resulting from sales increases for sunglasses and contact lenses, partially
offset by earnings shortfalls elsewhere in the Asia-Pacific region for
traditional contact lenses and sunglasses.
Sales outside the U.S. totaled $830 million in 1994, an increase of $29
million or 4% from 1993. European revenues improved $17 million or 4%,
reflecting improved results for lens care solutions and planned replacement
lenses overall and for over-the-counter medications and prescription
pharmaceutical products in Germany. Sales of sunglass products declined from
1993 based on actions to reduce distributor inventory levels as well as
increased competition in certain markets. In the Asia-Pacific region, sales
improved $12 million, led by results in Japan, due to increased demand for
planned replacement lenses and favorable exchange rate changes which more than
offset weakened consumer spending. Elsewhere in that region, sales improvement
was attributable to increased shipments of planned replacement lenses. Revenues
in Canada and Latin America were relatively even with the prior year.
Business segment earnings in markets outside the U.S. in 1994 declined
$15 million or 11% from 1993, reflecting the impact of lower sunglass revenues,
due to efforts to balance distributor inventories, as well as the cost of excess
capacity for the manufacture of planned replacement contact lenses in Ireland,
offset by gains for lens care solutions and pharmaceutical products. On a
year-over-year basis, changes in exchange rates had virtually no impact on
earnings in U.S. dollars.
U.S. sales totaled $984 million in 1995, an increase of $32 million or
3% from 1994. Revenue increases for planned replacement lenses, sunglasses,
pharmaceuticals and hearing aids were reduced by shortfalls for soft lens care
solutions. The improvement reflected the impact of new product introductions as
well as a closer alignment of the Company's sales to consumer purchasing
patterns, particularly in the sunglass business.
U.S. business segment earnings of $158 million in 1995 increased $56
million or 56% over 1994. This progress was led by improved results for
sunglass, hearing aid, planned replacement lens and pharmaceutical products.
Improvement was also noted for the U.S. oral care business, which benefited from
lower operating expenses, including a consolidation of administrative functions.
These positive factors more than offset earnings shortfalls for soft lens
solutions resulting from lower sales levels and increased spending to support
ReNu products in the current year.
U.S. revenues of $952 million in 1994 increased $22 million or 2% from
1993. The full year impact of 1993 acquisitions in the skin care, hearing aid
and dental implant businesses and significant gains in revenues for lens care
products were the primary factors. In addition, U.S. pharmaceutical revenues
advanced 19%, led by incremental sales of Tobramycin and Levobunolol. Offsetting
these increases, sunglass results were down slightly as incremental sales from
the acquisition of Revo were more than offset by the effect of a tightening of
marketing and sales policies. Oral care revenues declined as a result of price
reductions to address increased competition and sell through older technology
product.
U.S. business segment earnings in 1994 decreased $69 million or 41% from
1993. These results reflected the impact on operating margins of actions taken
to normalize U.S. contact lens and sunglass distributor inventories and costs
for the launch of new technology Interplak products and 1994 investments in the
U.S. hearing care business. Offsetting these factors were gains for lens care
solutions, eye care products and dental implants, as well as incremental
earnings contributed by the 1994 acquisition of the Revo product line.
Other Income And Expenses Income from investments was $39 million in 1995, $35
million in 1994 and $14 million in 1993. In 1995, the effect of higher
investment levels and interest rates was reduced by lower income generated by an
interest rate swap associated with the Wilmington Partners L.P. transaction. The
1994 increase over 1993 was attributable primarily to discontinuing a practice
of using intercompany loans to reduce U.S. short-term borrowings over limited
periods. The increase was also due to income generated from the aforementioned
interest rate swap and to rising interest rates in 1994.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 35
<PAGE>
Financial Review
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Interest expense was $46 million in 1995, $41 million in 1994 and $34
million in 1993. The 1995 increase reflects higher average U.S. interest rates,
despite a modest decrease in average outstanding debt levels. The higher expense
in 1994 reflected the full-year impact of acquisition-related borrowings
incurred in 1993, discontinuing the practice of using intercompany loans to
reduce short-term borrowings over limited periods and increases in interest
rates.
The Company pursues a neutral strategy with respect to interest rate
movements. Its policy is to maintain, within reasonable parameters, a natural
balance between floating rate investments, which are predominantly held outside
of the U.S., and floating rate debt, which is predominantly U.S. obligations. To
the extent this natural hedge position becomes unbalanced, the Company may enter
into interest rate swap agreements or undertake long-term fixed rate borrowings,
the proceeds from which may repay short-term debt. As a result of this practice,
the Company's exposure to the normal rise and fall of U.S. interest rates is
mitigated. The Company has classified its interest rate swap agreements as held
for purposes other than trading. Net payments or receipts under the interest
rate swap agreements are accrued and generally recorded as adjustments to
interest expense. See Note 9 -- Debt, Note 14 -- Fair Value Of Financial
Instruments and Note 15 -- Derivative Financial Instruments for a further
discussion of these transactions.
The Company does not engage in foreign currency speculation. Its
objective is to effectively hedge 100% of identified foreign currency
transaction exposures on an after-tax basis to minimize the impact of foreign
exchange rate movements on its operating results. It does not typically hedge
exposures arising in countries with hyperinflationary economies, restrictive
exchange controls or undeveloped currency markets due either to the cost of
hedging or the lack of viable hedging instruments. The estimated notional amount
of exposures that remained unhedged at December 30, 1995 totaled $5.2 million.
The Company also hedges certain firm commitments for the purchase of inventory
and its net investments in certain subsidiaries. The Company does not typically
hedge to protect the translated operating results of non-U.S. operations or
economic exposures for which hedge contract gains or losses would be recognized
in the current period's earnings. Therefore, the Company does not view itself as
sustaining market risk from its use of hedging instruments.
The following table summarizes the pre-tax components of foreign
currency gains and losses for the last three years:
Dollar Amounts In Millions 1995 1994 1993
- - ------------------------------------------------------------------------------
Transaction loss (gain), net $1.8 $(15.7) $(22.5)
Translation loss 4.4 13.1 11.4
- - ------------------------------------------------------------------------------
Loss (gain) from foreign currency, net $ 6.2 $(2.6) $(11.1)
================================================================================
The forward premiums or discounts realized on hedge contracts are
substantially based on interest rate differentials between the countries whose
currencies are being traded. The decline in net transaction gains in 1995 and
1994 compared to earlier periods resulted from lower discount income on Irish
pound contracts used to hedge transaction exposures and the equity investment in
two subsidiaries.
The Company records translation gains and losses as adjustments to
shareholders' equity. Generally, it does not hedge the translation of non-U.S.
assets and liabilities, except in the case of its equity investment in certain
subsidiaries. However, translation adjustments relating to operations in
countries with highly inflationary economies have been recorded in net earnings,
along with all transaction gains and losses. Translation losses decreased in
1995 due to improved economic stability in Brazil. Translation losses increased
in 1994, primarily due to higher inflation and devaluations in Turkey and
Venezuela.
During the 1995 second quarter, the Company announced the sale of its
Sports Optics Division and recorded a pre-tax gain of $36 million.
36 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
The Company's current assessment of certain of the legal matters
described in Note 16 -- Litigation has permitted management to estimate the
likely costs and expenses to be incurred in connection with the actions.
Accordingly, in the 1995 second and fourth quarters the Company recorded
litigation provisions of $16 million and $6 million, respectively.
Minority interest expense includes distributions to the outside investor
in Wilmington Partners L.P., formed in December 1993.
Income Taxes The Company's reported tax rate for 1995 was 36.9%. The tax rate
for 1994 was 52.6%. Excluding the goodwill impairment charge for which there was
no associated tax benefit, the 1994 reported rate would have been 32.0%. The tax
rate for 1993 was 33.5%. The higher 1995 rate reflects shifts in geographic
earnings and the inability to fully utilize foreign tax credits in the current
year. In 1994 and 1993 the Company recognized the positive impact of German and
U.S. statutory tax rate changes on its deferred tax benefit in the years in
which the changes were enacted. This was not material to earnings results in
either period.
Net Earnings And Earnings Per Share Net earnings were $112 million or $1.94 per
share in 1995, compared to $31 million or $0.52 per share in 1994 and $139
million or $2.31 per share in 1993. Excluding the gain on sale of the Sports
Optics Division of $21 million or $0.36 per share after taxes and restructuring
expense of $17 million or $0.30 after taxes, 1995 net earnings would have been
$109 million or $1.88 per share, compared to comparable results of $106 million
or $1.78 per share in 1994 and $175 million or $2.92 per share in 1993, the
latter amounts excluding goodwill impairment and restructuring charges in those
years. Litigation provisions further reduced 1995 earnings by $14 million or
$0.24 per share after taxes and expenses related to retirement and benefit costs
for the Company's former Chief Executive Officer reduced earnings by $4 million
or $0.08 per share after taxes. Excluding these results from comparisons, 1995
earnings would have been $127 million or $2.20 per share, an increase of $21
million or $0.42 per share from 1994.
Fourth Quarter Operating Results In the 1995 fourth quarter, reported sales were
$455 million versus $482 million in 1994. Reported operating earnings were $13
million as compared to a loss of $46 million in 1994. Comparable basis sales
were $455 million, an increase of $9 million or 2% over comparable 1994 results.
Comparable basis operating earnings were $40 million, an increase of $15 million
or 62% over 1994. These results reflect improved performance for sunglasses and
planned replacement contact lenses, which offset sales and earnings shortfalls
for the global oral care and U.S. lens care businesses.
In the 1994 fourth quarter, reported sales were $482 million versus $453
million in 1993. Reported operating losses of $46 million were incurred compared
to earnings of $12 million in 1993. Comparable basis sales totaled $446 million,
an increase of $24 million or 6% from the corresponding 1993 period. Operating
earnings of $25 million were $34 million or 58% below 1993. Earnings results in
1994 included costs associated with efforts to normalize contact lens and
sunglass distributor inventories and the corresponding related impact of lower
worldwide manufacturing volumes on the cost of contact lenses and sunglasses,
the effect of reduced pricing on margins for older technology Interplak products
and operating losses for hearing care products.
LIQUIDITY AND
FINANCIAL
RESOURCES
The Company evaluates its liquidity from several perspectives, including its
ability to generate earnings and positive cash flows, its financial position,
its access to financial markets and the adequacy of working capital levels.
The Company has a stated goal to maximize free cash flow, which is
defined as cash generated before the payment of dividends, the borrowing or
repayment of debt, stock repurchases and the acquisition or divestiture of
businesses. Free cash flow for the year ended December 30, 1995 totaled $189
million. For the year ended December 30, 1994 free cash flow totaled $188
million. This strong performance was primarily attributable to the Company's
successful management of working capital levels.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 37
<PAGE>
Financial Review
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The Company historically maintained a relatively low level of net debt,
or borrowings less cash, cash equivalents and short-term investments. Because of
the transfer of liquid funds to long-term investments in both 1995 and 1994, net
debt is significantly higher than in the recent past. Based on the expected
success of efforts to generate free cash flow to support operations, management
does not anticipate a need for significant new debt financing beyond that to
refinance existing short-term debt and finance new acquisitions.
Cash Flows From Operating Activities Cash provided by operating activities
totaled $278 million in 1995, an increase of $15 million from the prior year.
This improvement was primarily attributable to cash realized from the net
settlement of foreign currency hedge contracts in 1995 and the comparison
against the cash used to complete restructuring actions in 1994. These factors
were moderated by the positive cash flow in 1994 generated by collections on
receivables.
Successful asset management efforts in 1994 were evident as net earnings
adjusted for goodwill impairment and other non-cash items including
depreciation, amortization and deferred taxes of $242 million was fully realized
in the positive cash flow from operations totaling $263 million, an improvement
of $121 million or 85% over 1993. This success was primarily the result of lower
net receivables, due to improved collections, reduced customer delinquencies and
tightened credit terms. This improvement was moderated by lower accrued
liabilities, which included charges against the 1993 restructuring accrual.
Taxes payable also decreased as a result of lower earnings and the payments of
1993 tax liabilities.
Cash Flows From Investing Activities Cash used in investing activities was
reduced $387 million from 1994 to $165 million. Purchases of property, plant and
equipment totaled $95 million. Major projects in 1995 included new cast molding
capacity for contact lenses and manufacturing improvements for sunglasses in the
U.S., Europe and Asia-Pacific regions. Other investing activities in 1995
included approximately $136 million invested in securities issued by a
subsidiary of a triple-A rated financial institution more fully described in
Note 7 -- Other Investments and amounts received from the divestiture of the
Company's sports optics business.
Cash used in investing activities in 1994 increased $164 million from
1993 to $552 million. In the 1994 third quarter the Company's subsidiary, Bausch
& Lomb Ireland, invested $425 million in securities issued by a wholly-owned
subsidiary of a triple-A rated financial institution more fully described in
Note 7 -- Other Investments. Purchases of property, plant and equipment totaled
$85 million in 1994, a decrease of $22 million from 1993, reflecting stringent
expenditure controls. Major projects in the U.S. and Europe included new
manufacturing technology for contact lenses, added capacity for the production
of lens care solutions and improvements in sunglass manufacturing. Other
investing activities also included the acquisition of the assets of Revo, Inc.
Cash Flows From Financing Activities Approximately $149 million in cash was used
in financing activities in 1995, including repurchases of the Company's Common
shares, the payment of dividends and a net reduction in debt. The repurchase of
an additional 2,000,000 Common shares was authorized by the Company's board of
directors in 1995. At December 30, 1995, 1,836,200 shares remain available for
repurchase under the authorization terms. The amount of repurchases in any year
is based on market conditions and cash flows. In 1995, cash proceeds from the
sale of the Sports Optics Division were used primarily for the repurchase of
Common shares.
Net cash used in financing activities totaled $47 million in 1994. Funds
were used for the payment of dividends and repurchases of the Company's Common
shares. The net increase in debt represented additional U.S. short-term
borrowings.
38 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
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Financial Position The Company's objective of maximizing its return on
shareholders' equity requires the cost of capital to be minimized. The effective
use of debt financing has lowered the Company's cost of capital and contributed
to its return to shareholders.
In total, short- and long-term borrowings decreased by $16 million to
$574 million in 1995. The ratio of total debt to equity stood at 62% and 65% at
year-end 1995 and 1994, respectively. Cash and investments totaled $195 million
in 1995 and $233 million in 1994. Cash equivalents consist primarily of U.S. and
Eurodollar time deposits with maturities of less than three months.
Access To Financial Markets Bausch & Lomb's reputation, coupled with its
financial position and cash flows, assures access to financing in markets around
the world. The Company's commercial paper has been rated A-2 by Standard & Poors
and P-1 by Moody's Investor Services. Its long-term debt is rated A and A-2 by
Standard & Poors and Moody's, respectively. This enables the Company to raise
funds at a low effective cost. To support its liquidity requirements, the
Company maintains U.S. revolving credit agreements, typically with 364-day
credit terms totaling $290 million. The interest rate under the agreements is at
the prime rate, or, at the Company's option, at a mutually acceptable market
rate. No debt was outstanding under these agreements at December 30, 1995, nor
were there any borrowings outstanding under the Company's $300 million
medium-term note program. In addition, the Company maintains bank lines of
credit for its financing requirements. At year end, unused U.S. bank lines of
credit amounted to approximately $34 million. The availability of adequate
credit facilities provides the Company with a high degree of flexibility to meet
its obligations, fund capital expenditures and invest in growth opportunities.
Working Capital Working capital amounted to $71 million at year-end 1995
compared to $277 million in the prior year. The decrease is primarily due to the
investment in securities issued by a subsidiary of a triple-A rated financial
institution described previously. The current ratio at year-end 1995 was 1.1
compared to 1.4 in 1994.
OUTLOOK
Bausch & Lomb expects its sales and operating earnings performance in 1996 to
contribute toward its stated multi-year objective of annualized revenues and
earnings growth in the range of 10%.
Sales in the worldwide sunglass business are expected to benefit from
the increasing contribution of new products like the successful Orbs, Predator,
Side Street and Killer Loop Street Sport products introduced to global markets
in 1995. Actions to address product supply issues which constrained performance
in 1995 are substantially complete and should enhance the Company's ability to
effectively respond to changes in consumer preference. Revenues are expected to
also benefit from the 1996 acquisition of Arnet Optic Illusions, Inc. The
Arnette line, with its distinctive high-performance designs, enhances the
Company's position in the sport market through its strong position in niches
such as surfing, snowboarding, skateboarding and mountain biking. The Company's
Revo and Liz Claiborne lines are being expanded into global markets,
particularly emphasizing Europe in 1996. In addition, the Company has announced
actions to centralize certain administrative functions in its U.S. commercial
sunglass operations and to eliminate excess manufacturing capacity and improve
customer responsiveness by the development of global product delivery centers in
the U.S., Ireland and Hong Kong. While the costs of implementing these actions
will offset any savings in 1996, they are expected to make an important
contribution to worldwide earnings performance in 1997 and beyond.
1996 will be an important year for the Company's global contact lens
business. Intense competition in the planned replacement and disposable lens
segments of the market will continue. Expanded distribution for the recently
introduced SofLens66 planned replacement product and finalization of a new
manufacturing technology jointly developed with IBM should enhance the Company's
performance in the important U.S. market in 1996. In addition, the Company has
completed the acquisition of Award plc, manufacturer of a high water daily
disposable lens using a patented cast mold manufacturing technology and highly
efficient distribution process. This acquisition should enhance the Company's
competitive position in Europe. In 1996 the Company will also apply for FDA
approval to market this lens in the U.S. As market demand continues
Bausch & Lomb Incorporated and Consolidated Subsidiaries 39
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
to shift toward planned replacement and disposable lens products, the Company
will increasingly manage its traditional lens products strategically to enhance
total return. As part of this transition the Company will undertake the
rationalization of its current product offerings. Some costs to eliminate
product lines will be incurred in 1996. However, total return on lens product
sales is expected to improve.
The lens care business will continue to respond to challenges in the
important U.S. market as lens wearers convert to disposable and planned
replacement lenses. While growth in the overall lens care market in the U.S. is
not expected, the chemical disinfectant segment, in which ReNu Multi-Purpose
Solution is the market leader, is still growing. There will be continued
pressure on market share from both branded and private label competition, but
the Company's success in maintaining its share in 1995 demonstrates the strength
of this franchise. Outside the U.S., the Company has significant opportunities
for growth, both by expanding into new markets and utilizing partnerships with
practitioners in existing markets to develop higher levels of compliance. During
1996, the Company expects to introduce additional hydrogen peroxide-based
products into the European market. The RGP solutions category, strengthened by
the new Boston Advance Comfort Formula solution and the one-step Boston
Simplicity successfully introduced in 1995, should benefit from expanded
consumer acceptance. The overall earnings return on sales of lens care products
is expected to remain high, despite increased investment in advertising and
promotions required as competition intensifies.
A continuation of a good rate of growth for prescription pharmaceuticals
is anticipated in 1996. Through strategic partnerships for licensing products
and technologies, the Company will seek to improve its balance in the U.S.
market between a successful portfolio of generic pharmaceuticals and the stable
earnings associated with successful ophthalmic proprietary products. The Company
expects to introduce a number of new products into the U.S. market in 1996.
Outside the U.S., the Company expects to continue to expand products
manufactured by its Dr. Mann Pharma subsidiary into new markets. By focusing on
the synergies in its worldwide pharmaceutical base, the Company also expects to
complete actions to enhance the earnings return on sales.
A steady stream of new product offerings in the skin care business,
currently focused on the U.S. market, and expansion of Dr. Mann Pharma's current
product offerings in Europe should improve results for the Company's
over-the-counter business.
Biomedical sector results are expected to grow modestly as a result of
newly acquired product lines in the biotechnology area.
Earnings performance should also benefit from the progress of announced
efforts to reduce annualized costs by $50 million by 1998. Actions will
primarily include a reduction in corporate administration costs, principally
headcount, and the consolidation of administrative functions around the world.
The cost of severance and asset write-offs for projects which had
been approved by management prior to year end were reflected in the 1995
restructuring reserve. Additional expenses for these projects and new actions
are expected to be incurred in 1996.
In addition, the Company regularly reevaluates its existing portfolio of
businesses and pursues opportunities to maximize shareholder return. This led to
the sale of the Sports Optics Division in 1995 and the announcement in 1996 that
the Company would explore the sale of its Oral Care Division which markets the
Interplak line of products.
Other expenses are expected to be comparable to 1995. Interest expense
is contingent on the level of cash flow generated from operations and interest
rates. Currency gains and losses are also dependent on trends in interest rates,
primarily in Ireland and the U.S. and on exchange rate changes in certain
hyperinflationary economies, which the Company is unable to predict.
Finally, the Company again expects to generate positive cash flow. Free
cash flow is expected to benefit from growth in net earnings and ongoing asset
management efforts. Capital expenditures will total approximately $130 million.
Major projects will include investments in improved manufacturing and systems
technologies for planned replacement contact lenses, sunglasses, lens care
solutions and pharmaceuticals. In addition, the Company is expected to obtain
long-term financing by issuing medium-term notes under its current shelf
registration.
40 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
OTHER
INFORMATION
"Safe Harbor" Statement Under The Private Securities Litigation Reform Act Of
1995 The statements in this financial review which are not historical facts are
forward looking statements that involve risks and uncertainties. This includes
but is not limited to risks associated with product demand and consumer
acceptance; the development of new manufacturing technologies including the
contact lens and sunglass initiatives described earlier; the effect of economic
conditions and changes in interest and exchange rates; the impact of competitive
products and pricing, product development and regulatory approval risks,
particularly for personal health and medical sector products; capacity,
distribution and supply constraints or difficulties; the results of financing
efforts; the effect of the Company's accounting policies and other risks
detailed in this report and other public filings.
Dividends The annual dividend declared on Common stock was $1.01 per share in
1995, $0.955 per share in 1994 and $0.88 per share in 1993. Quarterly dividends
declared on Common stock were raised 6% to $0.26 per share in July 1995 and were
raised 11% to $0.245 per share in March 1994 compared to $0.22 per share for all
of 1993. These increases reflected the Company's desire to increase its dividend
on an annual basis while maintaining a payout rate of between 30% to 35% of the
previous year's earnings before non-recurring charges. Future dividend increases
are not certain.
Return On Equity And Capital Return on average shareholders' equity was 11.9% in
1995, compared with 3.2% in 1994 and 15.5% in 1993. These results include the
impact of non-recurring charges. Excluding these charges, return on equity would
have been 11.7% in 1995, 11.0% in 1994 and 19.5% in 1993. The improvement in
1995 reflects improved operating performance primarily in the oral care, skin
care, contact lens, hearing aid and prescription pharmaceutical businesses. The
decrease in 1994 from 1993 reflected lower earnings performance in the contact
lens, sunglass, hearing aid and oral care businesses. Further excluding the
cumulative translation adjustment, return on equity for 1995 was 13.1%, compared
with 3.4% for 1994 and 15.9% for 1993.
Return on average capital employed was 9.3% for 1995, 3.8% for 1994 and
11.0% for 1993. Again, excluding non-recurring charges, return on capital would
have been 9.6% in 1995, 8.4% in 1994 and 13.4% in 1993. The change is due to a
modest improvement in earnings.
Environment The Company believes it is in compliance in all material respects
with applicable environmental laws and regulations. The Company is presently
involved in remediation efforts at certain locations, some of which are Company
owned. At all such locations, the Company believes such efforts will not have a
materially adverse effect on its results of operations or financial position.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 41
<PAGE>
Financial Review
- - --------------------------------------------------------------------------------
Quarterly Results
The following table presents net sales, gross profit (net sales less cost of
products sold), net earnings (loss) and net earnings (loss) per share for each
quarter during the past three years:
<TABLE>
<CAPTION>
Net
Earnings
Net Gross Net Earnings (Loss)
Dollar Amounts In Thousands (Except Per Share Data) Sales Profit (Loss) Per Share
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
First $465,601 $247,236 $20,284 $0.34
Second 535,459 301,370 51,589(1) 0.89(1)
Third 476,757 271,262 43,514 0.75
Fourth 455,066 253,031 (3,365)(2) (0.04)(2)
- - --------------------------------------------------------------------------------------------------------------------
Total $1,932,883 $1,072,899 $112,022 $1.94
====================================================================================================================
1994
First $439,388 $234,727 $35,924 $0.60
Second 485,625 262,385 33,898 0.57
Third 486,059 238,040 23,377 0.39
Fourth 481,614 244,255 (62,076)(3) (1.04)(3)
- - --------------------------------------------------------------------------------------------------------------------
Total $1,892,686 $979,407 $31,123 $0.52
====================================================================================================================
1993
First $407,605 $219,774 $32,851 $0.54
Second 479,429 269,645 47,028 0.78
Third 490,136 273,484 52,022 0.87
Fourth 452,880 238,264 7,001(4) 0.12(4)
- - --------------------------------------------------------------------------------------------------------------------
Total $1,830,050 $1,001,167 $138,902 $2.31
====================================================================================================================
</TABLE>
(1)Includes the after-tax gain on sale of the Sports Optics Division of $20.8
million or $0.36 per share and the after-tax effect of a litigation provision
of $10.7 million or $0.18 per share.
(2)Includes the after-tax effect of restructuring charges of $17.4 million or
$0.30 per share, the after-tax effect of a litigation provision of $3.6
million or $0.06 per share and the after-tax effect of a CEO retirement
charge of $4.4 million or $0.08 per share.
(3)Includes goodwill impairment charge, with no associated tax benefit, of $75.0
million or $1.26 per share.
(4)Includes the after-tax effect of restructuring charges of $36.5 million or
$0.61 per share.
Quarterly Stock Prices
Bausch & Lomb Common stock is listed on the New York Stock Exchange and is
traded under the symbol BOL. The following table shows the price range of the
Common stock for each quarter for the past three years:
<TABLE>
<CAPTION>
1995 1994 1993
Price Per Share Price Per Share Price Per Share
- - ---------------------------------------------------------------------------------------------------------------------------------
High Low High Low High Low
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $36 1/4 $30 7/8 $53 7/8 $47 1/2 $57 1/2 $50 3/4
Second 42 1/4 35 1/4 52 37 1/8 55 3/8 47 7/8
Third 44 1/2 39 1/2 39 3/4 34 1/4 50 3/4 43
Fourth 41 1/8 32 1/4 39 3/8 30 5/8 53 1/2 45 1/8
=================================================================================================================================
</TABLE>
42 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
Statement of Earnings
- - --------------------------------------------------------------------------------
FOR THE YEARS ENDED
DECEMBER 30, 1995, DECEMBER 31, 1994 AND DECEMBER 25, 1993
(Dollar Amounts In Thousands -- Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994* 1993*
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $1,932,883 $1,892,686 $1,830,050
Costs And Expenses
Cost of products sold 859,984 913,279 828,883
Selling, administrative and general 769,935 724,219 668,436
Research and development 65,622 60,421 57,864
Goodwill impairment charge -- 75,000 --
Restructuring charges 26,697 -- 50,000
- - -------------------------------------------------------------------------------------------------------------------------
1,722,238 1,772,919 1,605,183
- - -------------------------------------------------------------------------------------------------------------------------
Operating Earnings 210,645 119,767 224,867
- - -------------------------------------------------------------------------------------------------------------------------
Other (Income) Expense
Investment income (39,009) (35,339) (14,289)
Interest expense 45,765 41,379 34,202
Loss (gain) from foreign currency, net 6,244 (2,615) (11,068)
Gain on sale of Sports Optics Division (35,902) -- --
Litigation provision 21,700 -- --
- - -------------------------------------------------------------------------------------------------------------------------
(1,202) 3,425 8,845
- - -------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes And Minority Interest 211,847 116,342 216,022
Provision for income taxes 78,068 61,162 72,404
- - -------------------------------------------------------------------------------------------------------------------------
Earnings Before Minority Interest 133,779 55,180 143,618
Minority interest in subsidiaries 21,757 24,057 4,716
- - -------------------------------------------------------------------------------------------------------------------------
Net Earnings 112,022 31,123 138,902
Retained Earnings At Beginning Of Year 846,245 871,680 785,044
Cash Dividends Declared -- Common Stock,
$1.01 per share for 1995 ($0.955 for 1994 and $0.88 for 1993) 58,172 56,558 52,266
- - -------------------------------------------------------------------------------------------------------------------------
Retained Earnings At End Of Year $900,095 $846,245 $871,680
- - -------------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share $1.94 $0.52 $2.31
=========================================================================================================================
</TABLE>
*Amounts have been restated for certain items as more fully described in Note 2
-Restatement Of Financial Information.
SEE NOTES TO FINANCIAL STATEMENTS
Bausch & Lomb Incorporated and Consolidated Subsidiaries 43
<PAGE>
Balance Sheet
- - --------------------------------------------------------------------------------
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollar Amounts In Thousands)
<TABLE>
<CAPTION>
1995 1994
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $193,814 $230,369
Short-term investments, at cost which approximates market 803 2,173
Trade receivables, less allowances of $11,232 and $16,830, respectively 250,587 271,990
Inventories, net 304,298 312,781
Deferred taxes, net 82,557 40,372
Other current assets 98,288 96,281
- - ----------------------------------------------------------------------------------------------------------------
930,347 953,966
Property, Plant And Equipment, net 550,366 542,750
Goodwill And Other Intangibles, less accumulated amortization
of $96,597 and $77,394, respectively 381,495 395,950
Other Investments 561,232 425,000
Other Assets 126,626 140,065
- - ----------------------------------------------------------------------------------------------------------------
Total Assets $2,550,066 $2,457,731
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $284,510 $252,783
Current portion of long-term debt 98,990 47,788
Accounts payable 81,927 71,718
Accrued compensation 79,767 71,742
Accrued liabilities 275,936 216,956
Federal and foreign income taxes 38,347 15,551
- - ----------------------------------------------------------------------------------------------------------------
859,477 676,538
Long-Term Debt, less current portion 190,974 289,504
Other Long-Term Liabilities 139,925 149,094
Minority Interest 430,390 428,208
- - ----------------------------------------------------------------------------------------------------------------
Total Liabilities 1,620,766 1,543,344
- - ----------------------------------------------------------------------------------------------------------------
Shareholders' Equity
4% Cumulative Preferred stock, par value $100 per share -- --
Class A Preferred stock, par value $1 per share -- --
Common stock, par value $0.40 per share, 60,198,322 shares issued 24,079 24,079
Class B stock, par value $0.08 per share, 1,268,578 shares issued
(1,072,880 shares in 1994) 101 86
Capital in excess of par value 107,788 93,849
Cumulative translation adjustment 85,122 47,609
Retained earnings 900,095 846,245
- - ----------------------------------------------------------------------------------------------------------------
1,117,185 1,011,868
Common and Class B stock in treasury, at cost, 4,525,844 shares
(2,278,745 shares in 1994) (178,730) (94,269)
Unearned compensation (9,155) (3,212)
- - ----------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 929,300 914,387
- - ----------------------------------------------------------------------------------------------------------------
Total Liabilities And Shareholders' Equity $2,550,066 $2,457,731
================================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
Statement of Cash Flows
- - --------------------------------------------------------------------------------
FOR THE YEARS ENDED
DECEMBER 30, 1995, DECEMBER 31, 1994 AND DECEMBER 25, 1993
(Dollar Amounts In Thousands)
<TABLE>
<CAPTION>
1995 1994* 1993*
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $112,022 $31,123 $138,902
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation of property, plant and equipment 89,216 82,421 72,001
Amortization of goodwill and other intangibles 16,147 16,850 12,595
Goodwill impairment charge -- 75,000 --
(Increase) decrease in deferred taxes (44,832) 36,833 (31,626)
Gain on sale of Sports Optics Division, net of taxes (20,823) -- --
Provision for litigation expense, net of taxes 14,151 -- --
Restructuring charges, net of taxes 17,353 -- 36,463
Loss on retirement of fixed assets 3,231 12,995 2,721
Exchange loss (gain) 8,160 (226) (1,240)
Decrease (increase) in accounts receivable 8,556 82,434 (66,722)
(Increase) decrease in inventories (18,168) 7,691 (35,103)
Decrease (increase) in other current assets 17,950 5,200 (35,794)
Increase (decrease) in accounts payable and accruals 34,510 (54,037) 2,803
Increase (decrease) in taxes payable 39,875 (55,767) 33,944
(Decrease) increase in other long-term liabilities (2,563) 16,602 11,315
Increase in minority interest 2,950 5,779 1,996
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 277,735 262,898 142,255
- - ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchases of property, plant and equipment (95,481) (84,807) (107,232)
Acquisition of businesses, net of cash
and short-term investments acquired (1,965) (29,077) (244,197)
Proceeds from sale of Sports Optics Division,
net of cash and short-term investments sold and taxes 60,545 -- --
Other investments (136,021) (425,000) --
Other 8,049 (13,178) (36,138)
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (164,873) (552,062) (387,567)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchases of Common shares (94,142) (20,581) (28,753)
Exercise of stock options 5,368 8,143 5,845
Tax benefit of stock transactions with employees 667 626 1,777
Restricted stock awards 11,657 3,758 43
Net proceeds from issuance of notes payable 32,292 29,538 23,006
Proceeds from issuance of long-term debt 640 11,110 150,949
Repayment of long-term debt (47,823) (24,341) (101,407)
Proceeds from formation of Wilmington Partners L.P. -- -- 400,000
Payment of dividends (57,798) (55,177) (51,112)
- - ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (149,139) (46,924) 400,348
- - ----------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash, cash equivalents and
short-term investments (1,648) 22,594 (25,773)
- - ----------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash, cash equivalents and short-term investments (37,925) (313,494) 129,263
Cash, cash equivalents and short-term investments, beginning of year 232,542 546,036 416,773
- - ----------------------------------------------------------------------------------------------------------------------------------
Cash, cash equivalents and short-term investments, end of year $194,617 $232,542 $546,036
==================================================================================================================================
</TABLE>
*Amounts have been restated for certain items as more fully described in Note 2
-- Restatement Of Financial Information.
SEE NOTES TO FINANCIAL STATEMENTS
Bausch & Lomb Incorporated and Consolidated Subsidiaries 45
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Note 1
---
ACCOUNTING
POLICIES
Principles Of Consolidation The financial statements include all majority-owned
U.S. and non-U.S. subsidiaries. Intercompany accounts, transactions and profits
are eliminated. The fiscal year is the 52 or 53 week period ending the last
Saturday in December. Certain amounts in the prior years' financial statements
have been reclassified to conform with the current year's presentation.
Use Of Estimates The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts based on
informed estimates and judgments of management with consideration given to
materiality. Actual results could differ from those estimates.
Cash And Cash Equivalents Cash equivalents include time deposits and highly
liquid investments with original maturities of three months or less.
Inventories Inventories are valued at the lower of cost or market, generally
using the first-in, first-out (FIFO) method. However, cost is determined by
using the last-in, first-out (LIFO) method for certain U.S. inventories.
Property, Plant And Equipment Property, plant and equipment, including
improvements that significantly add to productive capacity or extend useful
life, are recorded at cost, while maintenance and repairs are expensed
currently. Interest costs on significant projects constructed for the Company's
own use are capitalized as part of the cost of the newly constructed facilities.
Upon retirement or disposal of assets, the cost and related accumulated
depreciation are removed from the Balance Sheet and any gain or loss is
reflected in earnings.
Depreciation is calculated for financial reporting purposes using the
straight-line method based on the estimated useful lives of the assets as
follows: buildings, 30 to 40 years; machinery and equipment, 2 to 10 years; and
leasehold improvements, the lease periods.
Goodwill Goodwill is the excess of the cost of net assets acquired in business
combinations over their fair value. It is amortized on a straight-line basis
over periods ranging from 10 to 40 years. The Company evaluates goodwill for
impairment at least annually. In completing this evaluation, the Company
compares its best estimate of future cash flows, excluding interest costs, with
the carrying value of goodwill.
Revenue Recognition Net sales are generally recognized when products are
shipped. The Company has established programs which, under specified conditions,
enable customers to return product. The Company establishes liabilities for
estimated returns and allowances at the time of shipment. In addition, accruals
for customer discounts and rebates are recorded when revenues are recognized.
Advertising Expense External costs incurred in producing media advertising are
expensed the first time the advertising takes place. Promotional or advertising
costs associated with customer support programs are accrued when the related
revenues are recognized.
Costs associated with coupons and rebates are amortized over the
estimated period of benefit. Recoverability of these costs is evaluated on an
ongoing basis and writedowns to net realizable value are recorded as necessary.
At December 30, 1995 and December 31, 1994, $6,368,000 and $5,991,000 of
deferred advertising costs were reported as other current assets. Advertising
expenses of $232,473,000, $210,965,000 and $201,023,000 were included in the
Company's results of operations for 1995, 1994 and 1993, respectively.
Start-Up Costs One-time, non-recurring and incremental out-of-pocket
expenditures directly related to and incurred during the start-up phase of major
internal projects are deferred and amortized over future periods. Upon
conclusion of the start-up period, these costs are amortized on a straight-line
basis over periods of no more than three years. Recoverability of these costs is
assessed on an ongoing basis and writedowns to net realizable value are recorded
as necessary.
46 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
At December 30, 1995 and December 31, 1994, $11,072,000 and $13,730,000
of start-up costs were reported as other assets.
Investments In Debt And Equity Securities Certain of the Company's other
investments are classified as available-for-sale under the terms of Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", and accordingly, any unrealized
holding gains and losses, net of taxes, are excluded from income and recognized
as a separate component of shareholders' equity until realized. Fair value of
the securities is determined based on market prices or using discounted cash
flows and investment risk.
Impairment Of Long-Lived Assets In March 1995, the Financial Accounting
Standards Board issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". The Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. The Company will adopt this Standard during the first quarter of
1996. Such adoption is not expected to have a material effect on the Company's
financial position or results of operations.
Foreign Currency Translation Assets and liabilities of certain non-U.S.
subsidiaries are translated at current exchange rates, and related revenues and
expenses are translated at average exchange rates in effect during the period.
Resulting translation adjustments are recorded as a currency component in
shareholders' equity. Financial results of non-U.S. subsidiaries in countries
with highly inflationary economies are translated using a combination of current
and historical exchange rates and any translation adjustments are included in
net earnings, along with all transaction gains and losses for the period.
Foreign Exchange And Interest Rate Instruments The Company enters into forward
exchange and purchased foreign currency option contracts to hedge transactions
and firm commitments denominated in foreign currencies and certain non-U.S.
equity investments. The gains or losses on hedges of transaction exposures are
included in income in the period in which the exchange rates change. Gains and
losses on contracts which hedge specific foreign currency denominated
commitments, primarily purchases of inventory, are deferred and recognized in
the basis of the transaction when completed. Gains and losses on forward
contracts hedging non-U.S. equity investments are recorded as a cumulative
translation adjustment in shareholders' equity until the investment is
liquidated. The cash flows related to these gains and losses are reported as
cash flows from operating activities. The Company also enters into interest rate
swap and cap agreements to balance its floating rate asset and liability
positions. The Company amortizes premium income or expense incurred by buying or
selling foreign exchange and interest rate instruments over the life of the
agreements as nonoperating income or expense. Gains and losses on terminated
swaps are recognized over the remaining life of the underlying obligation as an
adjustment to investment income or interest expense.
Income Taxes The Company accounts for certain income and expense items
differently for financial reporting and income tax purposes. Deferred tax assets
and liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities applying enacted statutory tax
rates in effect for the year in which the differences are expected to reverse.
Earnings Per Share Net earnings per Common share are based on the weighted
average number of Common and Class B shares outstanding during the year,
adjusted for the assumed conversion of dilutive stock options. In computing the
per share effect of assumed conversion, funds which would have been received
from the exercise of options are considered to have been used to purchase Common
shares at current market prices, and the resulting net additional Common shares
are included in the calculation of average Common shares outstanding.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 47
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Note 2
---
RESTATEMENT
OF FINANCIAL
INFORMATION
The Company has restated its financial statements for the years ended December
31, 1994 and December 25, 1993. This action was taken as a result of an ongoing
investigation which identified uncertainties surrounding the execution of a
fourth quarter 1993 contact lens sales program and the improper recording of
1993 sunglass sales in Southeast Asia. In the fourth quarter of 1993 a marketing
program was initiated to implement a business strategy to shift responsibility
for the sale and distribution of a portion of the U.S. traditional contact lens
business to optical distributors. Subsequently, this strategy proved
unsuccessful and, in the 1994 third quarter, led to the implementation of a new
pricing policy for traditional contact lenses and a decision to accept on a
one-time basis returns from these distributors. The investigation of this
marketing program disclosed instances where unauthorized terms may have been or
were offered which were inconsistent with the stated terms and conditions of the
program. The resulting uncertainties relating to the execution of this marketing
program led to a decision to restate the 1993 financial statements to account
for shipments under the program as consigned inventory and to record revenues
when the products were sold by the distributors to their customers and to
reverse the effect of subsequent product returns and pricing adjustments related
to this program which had been previously recognized in 1994. The investigation
of Southeast Asia sunglass sales disclosed that in certain instances distributor
transactions recorded as revenues in 1993 had not actually resulted from a sale
to those customers, and thus were improperly recorded. The 1993 financial
statements have been restated to reverse the improperly recorded sales with a
corresponding restatement of the 1994 financial statements to reverse the effect
of sales returns previously recognized in that period. In the opinion of
management, all material adjustments necessary to correct the financial
statements have been recorded. The impact of these adjustments on the Company's
financial results as originally reported is summarized below:
<TABLE>
<CAPTION>
1994 1993
- - --------------------------------------------------------------------------------------------------------------
Dollar Amounts In Thousands (Except Per Share Data) As Reported As Restated As Reported As Restated
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales:
Healthcare $1,227,648 $1,249,923 $1,191,467 $1,169,192
Optics 622,904 642,763 680,717 660,858
- - --------------------------------------------------------------------------------------------------------------
Total $1,850,552 $1,892,686 $1,872,184 $1,830,050
==============================================================================================================
Business Segment Earnings:
Healthcare $73,466 $91,541 $210,393 $192,318
Optics 64,148 72,075 87,456 79,529
==============================================================================================================
Total $137,614 $163,616 $297,849 $271,847
==============================================================================================================
Net Earnings $13,478 $31,123 $156,547 $138,902
==============================================================================================================
Net Earnings Per Share $0.23 $0.52 $2.60 $2.31
==============================================================================================================
Retained Earnings At End of Year $846,245 $846,245 $889,325 $871,680
==============================================================================================================
</TABLE>
Note 3
---
RESTRUCTURING
CHARGES
In December 1995, the Company's board of directors approved plans to restructure
portions of the sunglass, biomedical and contact lens operations as well as
certain corporate administrative functions and a pre-tax restructuring charge of
$26,697,000 was recorded. The major components of the restructuring charge are
set forth in the table below:
<TABLE>
<CAPTION>
Corporate
Dollar Amounts In Thousands Sunglass Biomedical Contact Lens Administrative Total
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee separations $11,825 $2,048 $ -- $2,000 $15,873
Asset writedowns 3,405 2,207 3,120 1,000 9,732
Other 599 493 -- -- 1,092
=========================================================================================================================
$15,829 $4,748 $3,120 $3,000 $26,697
</TABLE>
48 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
The sunglass charge provided for the closure of certain U.S.
manufacturing operations and elimination of duplicate administrative functions
in the U.S. commercial business. The biomedical charge provided for the closure
of certain animal production facilities in North America and Europe, as well as
the consolidation of certain administrative functions. The contact lens charge
provided for costs associated with losses on disposition of assets related to
elective strategy changes for the traditional lens business. The corporate
administrative charge provided for the streamlining of corporate operations.
Asset writedowns primarily related to facilities being closed and losses
on disposition of equipment. Other charges primarily included losses under
leases and other commitments.
In the fourth quarter of 1993, the Company announced plans to
restructure certain of its operations and recorded a $50,000,000 pre-tax
restructuring charge related to sunglass, pharmaceutical and biomedical
operations. The major components of the restructuring charge are set forth in
the table below:
<TABLE>
<CAPTION>
Dollar Amounts In Thousands Sunglass Pharmaceutical Biomedical Total
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee separations $10,962 $ 750 $3,289 $15,001
Asset writedowns 14,603 2,446 2,052 19,101
Other 8,957 5,822 1,119 15,898
- - -------------------------------------------------------------------------------------------------------
$34,522 $9,018 $6,460 $50,000
=======================================================================================================
</TABLE>
The charge provided for costs to eliminate various sunglass
manufacturing, assembly and distribution operations, complete the closure of a
pharmaceutical manufacturing facility in New York, eliminate certain product
lines and realign global operations in all three businesses.
Cash payments for employee separations and other charges, including
losses on leases for vacated facilities and project management expenses totaled
$4,010,000, $21,833,000 and $4,978,000 in 1995, 1994 and 1993, respectively.
There were no accruals related to the 1993 restructuring actions remaining at
December 30, 1995.
Note 4
---
GOODWILL
IMPAIRMENT
In December 1994, decisions were made fundamentally realigning oral care
operations. Management of worldwide oral care operations was centralized and
most non-U.S. oral care operations were redirected to selected distributors.
These decisions were based on increased competition, a significant decline in
market share and operating losses which greatly reduced the expected life cycle
and estimated future cash flows for this business and reflected the Company's
belief that future strategic investments in its core and emerging businesses
would provide higher long-term shareholder returns. As a result, in December
1994 the Company recognized a goodwill impairment charge of $75,000,000, with no
associated tax benefit.
In determining the amount of the impairment charge, the Company
developed its best estimate of operating cash flows over the remaining business
life cycle, assumed to be 14 years. Future cash flows, excluding interest
charges, were discounted using an estimated 8.6% incremental borrowing rate.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 49
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Note 5
---
GEOGRAPHIC
REGION AND
BUSINESS
SEGMENT
INFORMATION
The Company's operating results are reported in two business segments,
healthcare and optics. The healthcare segment includes personal health, medical
and biomedical products. In the personal health sector, the Company's principal
lines of business include contact lens care products, eye care solutions,
over-the-counter medications, skin care products and oral care products. Medical
sector lines include contact lenses and lens materials, prescription
pharmaceuticals, hearing aids and dental implants. Biomedical sector lines
include purpose-bred laboratory animals for biomedical research, specific
pathogen-free eggs for vaccine production and a variety of biotechnical and
professional services provided to the scientific research community. Principal
lines of business in the optics segment include sunglasses and optical thin film
coating services and products. Effective April 1, 1995, the Company divested its
sports optics business, which marketed binoculars, riflescopes and telescopes.
The majority of the Company's products are marketed globally through
optical shops, distributors, healthcare practitioners or retailers. Ophthalmic
pharmaceuticals and over-the-counter medications are marketed primarily in the
U.S. and Europe, and skin care products are marketed in the U.S. and Canada.
Together, the solutions and sunglass lines account equally for about half the
Company's revenues, while contact lenses and biomedical products account equally
for another 25%. All other lines individually account for less than 10% of total
Company revenues.
Inter-area sales to affiliates represent products which are transferred
between geographic regions on a basis intended to reflect the market value of
the products as nearly as possible.
Identifiable assets are those assets used exclusively in the operations
of each business segment or geographic region, or which are allocated when used
jointly. Corporate assets are principally cash and cash equivalents, short-term
investments, other investments and certain property, plant and equipment.
The following tables present sales and other financial information by
geographic region and business segment for the years 1995, 1994 and 1993:
Geographic Region
<TABLE>
<CAPTION>
Europe, Canada &
Middle East Asia- Latin
Dollar Amounts In Thousands U.S. & Africa Pacific America Consolidated
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated customers $997,563 $471,049 $345,310 $118,961 $1,932,883
Inter-area sales to affiliates 151,646 79,655 12,990 4,205 248,496
Business segment earnings 136,813 93,156 43,630 (2,044) 271,555(1)
Identifiable assets 1,152,623 1,078,415 244,056 74,972 2,550,066
=============================================================================================================================
1994
Sales to unaffiliated customers $1,045,263 $414,236 $303,702 $129,485 $1,892,686
Inter-area sales to affiliates 135,597 101,571 1,643 4,375 243,186
Business segment earnings 35,253 91,939 29,964 6,460 163,616(2)
Identifiable assets 1,187,569 918,869 269,349 81,944 2,457,731
=============================================================================================================================
1993
Sales to unaffiliated customers $1,012,690 $396,909 $292,183 $128,268 $1,830,050
Inter-area sales to affiliates 130,093 94,949 2,139 2,397 229,578
Business segment earnings 153,928 89,980 17,724 10,215 271,847(3)
Identifiable assets 1,306,114 837,007 266,333 83,543 2,492,997
=============================================================================================================================
</TABLE>
1 Includes restructuring charges of $23.7 million as follows: U.S., $19.9;
Europe, Middle East & Africa, $3.3 and Canada & Latin America, $0.5.
2 Includes goodwill impairment charge of $75.0 million in the U.S.
3 Includes restructuring charges of $48.8 million as follows: U.S., $23.5;
Europe, Middle East & Africa, $16.6; Asia-Pacific, $4.6 and Canada & Latin
America, $4.1.
50 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
Business Segment
<TABLE>
<CAPTION>
Dollar Amounts In Thousands 1995 1994 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Healthcare $1,359,477 $1,249,923 $1,169,192
Optics 573,406 642,763 660,858
- - -----------------------------------------------------------------------------------------------------
$1,932,883 $1,892,686 $1,830,050
=====================================================================================================
EARNINGS BEFORE TAXES
AND MINORITY INTEREST
Healthcare $229,231 $91,541 $192,318
Optics 42,324 72,075 79,529
- - -----------------------------------------------------------------------------------------------------
Business segment earnings 271,555(1) 163,616(3) 271,847(4)
Corporate administration expense 60,910(2) 43,849 46,980(5)
- - -----------------------------------------------------------------------------------------------------
Operating earnings 210,645 119,767 224,867
Interest expense, net 6,756 6,040 19,913
Loss (gain) from foreign currency, net 6,244 (2,615) (11,068)
Gain on sale of Sports Optics Division (35,902) -- --
Litigation provision 21,700 -- --
- - -----------------------------------------------------------------------------------------------------
$211,847 $116,342 $216,022
=====================================================================================================
DEPRECIATION
Healthcare $63,865 $56,833 $46,778
Optics 22,484 22,605 22,043
Corporate 2,867 2,983 3,180
- - -----------------------------------------------------------------------------------------------------
$89,216 $82,421 $72,001
=====================================================================================================
IDENTIFIABLE ASSETS
Healthcare $1,219,384 $1,211,165 $1,329,854
Optics 410,097 471,794 492,507
Corporate 920,585 774,772 670,636
- - -----------------------------------------------------------------------------------------------------
$2,550,066 $2,457,731 $2,492,997
=====================================================================================================
CAPITAL EXPENDITURES
Healthcare $65,715 $63,933 $83,460
Optics 19,937 20,412 21,254
Corporate 9,829 462 2,518
- - -----------------------------------------------------------------------------------------------------
$95,481 $84,807 $107,232
=====================================================================================================
</TABLE>
(1) Includes restructuring charges of $23.7 million as follows: Healthcare,
$7.9; Optics, $15.8.
(2) Includes restructuring charges of $3.0 million.
(3) Includes goodwill impairment charge of $75.0 million for Healthcare.
(4) Includes restructuring charges of $48.8 million as follows: Healthcare,
$15.9; Optics, $32.9.
(5) Includes restructuring charges of $1.2 million.
Note 6
---
SUPPLEMENTAL
BALANCE
SHEET
AND CASH
FLOW
INFORMATION
Accounts Receivable The Company has entered into two agreements to sell
designated pools of U.S. trade accounts receivable up to $75,000,000 and
non-U.S. trade accounts receivable up to 3,000,000,000 Japanese yen. The U.S.
agreement expires in July 1996 and the non-U.S. agreement expires in December
1997. At December 30, 1995 and December 31, 1994, approximately $95,000,000 and
$108,000,000 of receivables, respectively, were sold under these agreements and
were reflected as reductions of trade accounts receivable. Fees and discounting
expense related to the U.S. agreement were recorded as interest expense and
totaled approximately $4,500,000 in 1995, $3,700,000 in 1994 and $3,000,000 in
1993.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 51
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the Company's customer
base, and their dispersion across different businesses and geographic areas.
Inventories
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
Dollar Amounts In Thousands 1995 1994
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 76,834 $ 79,295
Work in process 21,905 23,985
Finished products 214,901 222,079
- - -------------------------------------------------------------------------------------
313,640 325,359
Less: Allowance for valuation of certain U.S.
inventories at last-in, first-out cost 9,342 12,578
=====================================================================================
$304,298 $312,781
</TABLE>
Inventories valued using the LIFO method were approximately $83,631,000
and $98,442,000 at December 30, 1995 and December 31, 1994, respectively.
Property, Plant And Equipment
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
Dollar Amounts In Thousands 1995 1994
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 22,124 $ 21,474
Leasehold improvements 33,720 32,635
Buildings 396,954 366,003
Machinery and equipment 629,952 587,586
- - -------------------------------------------------------------------------------------
1,082,750 1,007,698
Less: Accumulated depreciation 532,384 464,948
- - -------------------------------------------------------------------------------------
$ 550,366 $ 542,750
=====================================================================================
</TABLE>
Cash Flow Information For the years ended December 30, 1995, December 31, 1994
and December 25, 1993 payments of interest were $44,587,000, $39,842,000 and
$29,307,000, respectively, and payments of income taxes were $96,706,000,
$69,827,000 and $61,056,000, respectively.
Note 7
--
OTHER
INVESTMENTS
In 1995, the Company's subsidiaries, Windmill Investors, Ltd. and Bausch & Lomb
Ireland, made investments totaling 219,000,000 Netherlands guilders (NLG),
approximating $136,000,000, in securities issued by a subsidiary of a triple-A
rated financial institution. The issuer's investments are restricted to high
quality short-term investments and government obligations and the issuer
reinvests all of its income. At December 30, 1995, the average U.S. dollar rate
of return was 5.47%, including the effects of foreign currency transactions
which effectively hedge the currency risk and convert Bausch & Lomb Ireland's
NLG income to a U.S. dollar rate of return. The Company's subsidiaries have the
right to call for redemption of the shares they hold each quarter at net asset
value. In the event this right is not exercised, the triple-A rated financial
institution has the right to put the shares it owns to the Company's
subsidiaries in March and June, 2003.
In 1994, the Company's subsidiary, Bausch & Lomb Ireland, invested
$425,000,000 in securities issued by a subsidiary of another triple-A rated
financial institution. The investment responded to a recent change in U.S. tax
law, under which the Company elected to invest in qualifying "active" assets
rather than face increased tax expenses associated with its non-U.S. earnings.
The securities rank senior to all other classes of the issuer's equity and rank
junior to the secured and unsecured liabilities of the issuer, including
subordinated debt obligations, and are neither payable upon demand nor have a
fixed maturity. The securities pay quarterly cumulative dividends
52 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
at a variable LIBOR-based rate. At December 30, 1995, this rate was 5.14%. The
issuer holds a call option on the securities, exercisable upon 180 days notice.
The securities will become freely transferable in approximately eight years. At
that time, the dividend rate will be reset, if necessary, to ensure that the
market value of the securities is equal to par value.
Management believes that the investments are fully recoverable, based on
the high quality and stability of the institutions, however, the investments are
subject to equity risks.
Note 8
---
PROVISION
FOR INCOME
TAXES
An analysis of the components of earnings before income taxes and minority
interest and the related provision for income taxes is presented below:
<TABLE>
<CAPTION>
Dollar Amounts In Thousands 1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before income taxes and minority interest:
U.S. $ 64,451 $ (3,556) $ 92,645
Non-U.S. 147,396 119,898 123,377
- - ------------------------------------------------------------------------------------------------------------
$211,847 $116,342 $216,022
Provision for income taxes:
- - ------------------------------------------------------------------------------------------------------------
Federal
Current $ 57,146 $ (7,316) $ 63,118
Deferred (27,492) 28,323 (22,526)
State
Current 12,335 (2,107) 10,274
Deferred (6,259) 5,613 (4,127)
Foreign
Current 47,122 27,534 41,940
Deferred (4,784) 9,115 (16,275)
- - ------------------------------------------------------------------------------------------------------------
$ 78,068 $ 61,162 $ 72,404
============================================================================================================
</TABLE>
Deferred taxes recognize the impact of temporary differences between the
amounts of assets and liabilities recorded for financial statement purposes and
such amounts measured in accordance with tax laws and are detailed below.
Realization of the tax loss and credit carryforwards, which expire between 1996
and 2009, is contingent on future taxable earnings. Valuation allowances have
been recorded for these and other asset items which may not be realized.
<TABLE>
<CAPTION>
DECEMBER 30, 1995 DECEMBER 31, 1994
- - ----------------------------------------------------------------------------------------------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Dollar Amounts In Thousands Assets Liabilities Assets Liabilities
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee benefits and compensation $ 66,945 $ 4,697 $ 60,599 $ 4,697
Inventories 36,764 2,436 24,993 281
Tax loss and credit carryforwards 33,315 -- 20,527 --
Restructuring accruals 11,437 -- 1,578 --
Sales and allowance accruals 20,073 20 16,420 --
Legal and litigation accruals 9,897 1,537 11,437 1,537
Depreciation and amortization 7,931 69,762 6,945 65,306
Unrealized foreign exchange losses 10,536 5,100 1,985 --
State and local income tax accruals 107 7,902 -- 11,122
Other accruals 10,777 7,296 4,138 7,425
- - ----------------------------------------------------------------------------------------------------------------
207,782 98,750 148,622 90,368
Less: Valuation allowance 26,475 -- 17,882 --
- - ----------------------------------------------------------------------------------------------------------------
Deferred taxes $181,307 $98,750 $130,740 $90,368
================================================================================================================
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries 53
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Reconciliations of the statutory U.S. federal income tax rate to
effective tax rates were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. tax rate 35.0% 35.0% 35.0%
Rate differential for Subpart F income 5.3 2.4 6.3
State income taxes, net of federal tax benefit 1.9 2.0 1.9
Goodwill amortization 1.0 2.2 0.8
Goodwill impairment charge with no income tax benefit -- 22.6 --
Difference between non-U.S. and U.S. tax rates (4.4) (2.9) (8.1)
Effect of enacted changes in non-U.S. tax rates -- (1.7) --
Foreign Sales Corporation tax benefit (1.2) (2.2) (1.3)
Other (0.7) (4.8) (1.1)
- - ----------------------------------------------------------------------------------------------------------
Effective tax rate 36.9% 52.6% 33.5%
==========================================================================================================
</TABLE>
At December 30, 1995, earnings considered to be permanently reinvested
in non-U.S. subsidiaries totaled approximately $655,000,000. Under the Omnibus
Budget Reconciliation Act of 1993, U.S. taxes could be assessed on undistributed
current or retained earnings of certain non-U.S. subsidiaries. However, foreign
tax credits associated with those earnings substantially offset any increase in
the Company's overall income tax expense.
In April 1991 and December 1991, the Internal Revenue Service (the
"Service") issued Notices of Deficiency relating to the Company's federal income
tax returns for the 1983-1984 and the 1985-1987 periods. The Company filed
petitions in the U.S. Tax Court (the "Court") to contest the deficiencies
alleged in the notices. Subsequently, the Company and the Service settled all
the issues raised in the notices except for those relating to the Company's
sunglass operations in Ireland and Hong Kong. In December 1993, the trial on the
overseas sunglass issues for the 1983-1984 and 1985-1987 periods was held in the
U.S. Tax Court. The Court had the matter under review until February 15, 1996 at
which time a Memorandum Opinion was filed. The Court upheld the Company's
position with respect to the sunglass operations in Ireland and Hong Kong and
against the deficiencies alleged in the notices. The Service has the right to
appeal this decision.
Note 9
---
DEBT
Short-term debt at December 30, 1995 and December 31, 1994 consisted of
$262,001,000 and $234,739,000 in U.S. commercial paper and $22,509,000 and
$18,044,000 in non-U.S. borrowings, respectively. To support its liquidity
requirements, the Company maintains U.S. revolving credit agreements with
364-day credit terms totaling $290,000,000, however, no debt was outstanding
under these agreements at December 30, 1995. A commitment fee at a rate of 0.05%
is charged on the unused portion. The interest rate under the agreements is at
the prime rate, or at the Company's option, at a mutually acceptable market
rate. The Company also currently maintains unused U.S. bank lines of credit
amounting to approximately $34,000,000. All compensating balance arrangements
are informal and do not restrict the withdrawal of funds. Under these
arrangements, the Company maintained average compensating bank balances of
$8,400,000 in 1995.
The Company has entered into two seven-year interest rate swap
agreements, each in notional amounts of $100,000,000, which convert $200,000,000
of U.S. commercial paper into fixed rate obligations with an effective interest
rate of 6.48%. The swaps will terminate on January 1, 2002.
The average U.S. short-term interest rates, which include the effect of
the interest rate swap agreements, were 6.3% and 5.9% at year end 1995 and 1994,
respectively. The rate outside the U.S. was 6.1% at the end of 1995 and 1994.
The aggregate Company rate was 6.3% at year end 1995 and 6.0% at year end 1994.
Average short-term interest rates for the year, excluding the effect of
short-term borrowings in the highly inflationary economy of Brazil, were 6.3% in
1995 and 4.6% in 1994. The maximum amount of short-term debt at the end of any
month was $297,213,000 in 1995 and $333,500,000 in 1994. Average month end
borrowings were $252,367,000 in 1995 and $294,300,000 in 1994.
54 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
The components of long-term debt were:
<TABLE>
<CAPTION>
Dollar Amounts In Thousands 1995 1994
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed rate notes payable:
Notes due in 1995 $ -- $ 44,989
Notes due in 1996 94,788 94,879
Notes due in 1997 and 2003, effectively converted
to floating rate 170,000 170,000
Other 9,191 10,710
Capital lease obligations:
Industrial Development Bonds, variable rate due in 2015 8,500 8,500
Other 7,485 8,214
- - ---------------------------------------------------------------------------------------------
289,964 337,292
Less: Current portion 98,990 47,788
- - ---------------------------------------------------------------------------------------------
$190,974 $289,504
=============================================================================================
</TABLE>
The notes due in 1996 bear interest at a weighted average rate of 4.9%.
The Company has entered into interest rate swap agreements with an aggregate
notional amount of $170,000,000 associated with long-term notes payable of the
same dollar amount maturing in 1997 and 2003, which effectively convert the
notes to floating rate obligations with an interest rate based on the one-month
U.S. composite commercial paper rate. At December 30, 1995, this rate was 5.8%.
Interest rate swap agreements resulted in a reduction in the long-term effective
interest rate from 6.0% to 5.4% in 1995 and from 5.8% to 4.7% in 1994.
The Industrial Development Bonds bear interest at a variable rate based
on a range of 40% to 90% of the prime rate as determined by prevailing market
conditions. At December 30, 1995, this rate was 5.7%. In 1994, the Company
established a $300,000,000 medium-term note program, providing for the issuance
of fixed or variable rate notes with maturities between nine months and 30
years. There have been no borrowings under this program through December 30,
1995. Long-term borrowing maturities during the next five years are $98,990,000
in 1996, $87,974,000 in 1997, $1,816,000 in 1998, $1,753,000 in 1999 and
$1,624,000 in 2000.
Note 10
---
OPERATING
LEASES
The Company leases land, buildings and machinery and equipment under
noncancelable operating leases. Future minimum payments under these leases as of
December 30, 1995 are as follows:
Dollar Amounts In Thousands
- - ----------------------------------------------------
1996 $24,318
1997 18,259
1998 14,493
1999 10,280
2000 8,106
Later years 15,767
- - ----------------------------------------------------
Total minimum lease payments $91,223
====================================================
Total rental expense for the years ended December 30, 1995, December 31,
1994 and December 25, 1993 amounted to $28,043,000, $27,055,000 and $26,862,000,
respectively.
During 1995, the Company entered into a seven-year variable rate
operating lease associated with an office facility in Rochester, New York, with
an associated residual value guarantee in an amount not to exceed $54,600,000.
At December 1995, estimated annual rent payments under the agreement
approximated $4,900,000.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 55
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
Note 11
---
EMPLOYEE
BENEFITS
The Company and its consolidated subsidiaries sponsor several retirement plans
which, in the aggregate, cover substantially all U.S. employees and employees in
certain other countries. In general, retirement benefits are based on years of
service and the employee's compensation near retirement. Certain non-U.S.
pension arrangements also provide termination indemnity payments. For the
largest U.S. plan, employees are eligible to participate upon the attainment of
age 21 and the completion of one year of service. These employees vest in the
plan after five years of service or the attainment of age 55. The Company funds
its major U.S. plan in an amount not less than minimum statutory funding
requirements nor more than the maximum amount that can be deducted for federal
income tax purposes. The plan's investments consist primarily of equity
securities, corporate bonds, U.S. government issues and cash and cash
equivalents. The Company also sponsors defined contribution plans and
participates in government-sponsored programs in certain non-U.S. locations.
In addition to retirement plans, the Company sponsors a participatory
defined benefit postretirement plan providing medical and life insurance
benefits to the majority of its U.S. employees. The plan provides benefits to
retirees who have attained age 55 with ten years of service. Covered spouses and
certain employees on disability also qualify for participation in the plan. In
general, under the medical benefits plan participants receive a stated
percentage of most medical expenses, reduced for annual and lifetime deductibles
and any payments made by government programs and other group coverage. The
Company has established a Voluntary Employee Benefit Association trust to
provide for payment of these benefits. Annual contributions of $5,000,000 were
made to the trust in 1995 and 1994. Earnings from the investments in this trust,
primarily participating insurance contracts, will over time reduce the expense
associated with providing these benefits. The Company intends to continue a
program of prefunding for these benefits on an annual basis, but the amount of
any future contributions is discretionary. The Company also provides
postretirement benefits to employees at a number of its non-U.S. locations in
accordance with local statutory requirements. Such benefits are generally
provided through government-sponsored plans.
Under the 1990 Stock Incentive Plan, a committee of the board of
directors of the Company is authorized to grant restricted shares of Common
stock to certain employees. The committee has awarded 288,819 and 95,700
restricted shares of Common stock to certain employees, including officers, in
1995 and 1994, respectively. Shares vest under these grants in thirds, with
vesting criteria including attainment of certain stock price performance goals,
satisfactory job performance and continued employment until applicable vesting
dates. No more than one-third of any grant will vest in a fiscal year. At
December 30, 1995, 114,408 shares have vested. Unearned compensation is recorded
at the date of the award based on the market value of the shares. Unearned
compensation related to these shares, included as a separate component of
shareholders' equity, aggregated $9,155,000 and $3,212,000 net of forfeitures at
December 30, 1995 and December 31, 1994, respectively, and is amortized to
expense as stock performance goals are met over the applicable vesting period.
The amount amortized to expense in 1995 was $4,324,000.
In addition, the Company sponsors supplemental defined benefit
retirement plans for certain key employees. These plans are unfunded. The
pension liability associated with the plans has generally been determined using
the same actuarial methods and assumptions as those used for the Company's
qualified plans. The annual cost of these plans has been included in the net
periodic pension cost shown below and totaled $921,000 in 1995 and $939,000 in
1994. The projected benefit obligation relating to these unfunded plans was
$6,107,000 at December 30, 1995 and $5,306,000 at December 31, 1994.
Plan assets and the projected benefit obligations have been measured as
of December for each period. Net periodic pension and postretirement benefit
costs have been determined using assumptions as of the beginning of each year.
The overall increase in net periodic pension costs since 1993 was attributable
to a net decrease in the discount rate assumption as well as unfavorable
demographic experience. The decrease in postretirement benefit expense since
1993 was attributable to changes in assumptions for discount and medical care
cost trend rates, population experience and favorable medical claims experience.
56 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
The components of net periodic pension cost and U.S. net periodic
postretirement benefit cost are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
Dollar Amounts In Thousands Plans Plans Plans Plans Plans Plans
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RETIREMENT PLANS
Service cost-benefits earned
during the period $ 5,444 $2,071 $ 6,822 $2,003 $4,493 $1,696
Interest cost on projected
benefit obligation 10,921 1,809 10,305 1,562 9,615 1,230
Actual return on plan assets (26,397) (1,874) 711 708 (12,322) (3,140)
Net amortization and deferral 17,701 954 (9,760) (1,690) 3,981 2,643
- - --------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 7,669 $2,960 $ 8,078 $2,583 $5,767 $2,429
==========================================================================================================================
OTHER POSTRETIREMENT
BENEFITS
Service cost-benefits earned
during the period $ 1,975 $ 2,598 $4,107
Interest cost on accumulated
benefit obligation 6,054 6,463 8,869
Actual return on plan assets (2,946) 1,080 377
Net amortization and deferral (346) (2,489) (792)
- - --------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 4,737 $ 7,652 $12,561
==========================================================================================================================
</TABLE>
Key economic assumptions used in developing the projected benefit
obligations for the Company's major U.S. and non-U.S. retirement plans and U.S.
postretirement plans at year-end were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- - ------------------------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
Plans Plans Plans Plans Plans Plans
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.75% 5.5-8.0% 8.25% 5.5-8.0% 7.0% 5.5-8.0%
Rate of increase in compensation levels 5.0% 4.2-6.5% 5.0% 4.2-6.5% 5.0% 4.2-6.5%
Expected long-term rate of return
on plan assets 9.0-10.0% 5.5-9.0% 9.0-10.0% 5.5-9.0% 9.0-10.0% 5.5-9.0%
Medical care cost trend rate 11.0% 12.0% 12.0%
=======================================================================================================================
</TABLE>
In December 1995, the Company elected to revise its assumptions for all
U.S. plans in recognition of a lower level of current long-term interest rates.
The discount rate was lowered from 8.25% to 7.75%. The medical care cost trend
rate will decrease one percent per year to 6.0% in the year 2000 for future
valuations. The medical care cost trend rate assumption has a significant effect
on the expense reported. For example, a 1% increase in the medical care cost
trend rate would have increased the aggregate of the service and the interest
cost components of net periodic postretirement benefit cost by approximately
$1,000,000 or 12% in 1995.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 57
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
The following tables set forth the funded status and amounts recognized
in the Company's consolidated balance sheet:
Retirement Plans
<TABLE>
<CAPTION>
DECEMBER 30, 1995 DECEMBER 31, 1994
- - ------------------------------------------------------------------------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Dollar Amounts In Thousands Benefits Assets Benefits Assets
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $17,589 $136,578 $9,044 $129,317
Non-vested benefits 705 3,952 411 4,081
- - ------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 18,294 140,530 9,455 133,398
Effect of projected future salary increases 9,475 15,699 4,289 16,066
- - ------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 27,769 156,229 13,744 149,464
Plan assets at fair value 32,651 119,460 13,595 110,996
- - ------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (less than)
in excess of plan assets (4,882) 36,769 149 38,468
Unrecognized net gain (loss) from past
experience different from that assumed 3,139 (6,393) 180 (6,096)
Unrecognized prior service costs 59 (13,413) 21 (14,906)
Unrecognized net transition obligation (12) (6,364) 578 (7,547)
Additional liability -- 11,334 -- 18,410
- - ------------------------------------------------------------------------------------------------------------------------------
Accrued pension liability $(1,696) $21,933 $928 $28,329
==============================================================================================================================
</TABLE>
Other Postretirement Benefits
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31,
Dollar Amounts In Thousands 1995 1994
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of postretirement benefit obligations:
Retirees $54,253 $59,924
Active eligible participants 6,800 8,578
Other active participants 21,556 18,385
- - --------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 82,609 86,887
Plan assets at fair value 16,489 8,543
- - --------------------------------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets 66,120 78,344
Unrecognized prior service cost 2,029 2,201
Unrecognized net gain 31,798 25,445
- - --------------------------------------------------------------------------------------------------------
Accrued postretirement benefit liability $99,947 $105,990
========================================================================================================
</TABLE>
The unrecognized projected pension benefit obligation in excess of plan
assets for retirement plans is being amortized against net periodic pension cost
over the remaining service lives of the plan participants. The Company has
recorded an additional liability to give recognition to the underfunded plan
positions. An intangible asset reflecting the related unrecognized prior service
cost has also been recorded.
Increasing the assumed medical care cost trend rates by one percentage
point would have increased the accrued postretirement benefit liability as of
December 30, 1995 by approximately $9,000,000 or 11%, reflecting the effect this
assumption has on the calculation of the obligation.
58 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
Note 12
---
MINORITY
INTEREST
In December 1993, four wholly-owned subsidiaries of the Company contributed
operating and financial assets with an estimated market value of $1,006,000,000
to Wilmington Partners L.P., a newly formed Delaware limited partnership (the
"Partnership"), in exchange for an aggregate 72% general and limited partnership
interest in the Partnership. Additionally, an outside investor contributed
$400,000,000 in cash to the Partnership in exchange for a 28% limited
partnership interest. Wilmington Management Corp., a wholly-owned subsidiary of
the Company, manages the activities of Wilmington Partners L.P. and has
fiduciary responsibilities to the Partnership. This transaction did not result
in any gain or loss for the Company.
The Partnership is a separate legal entity from the Company whose
purpose is to own and manage a portfolio of assets. Those assets include
portions of the Company's biomedical operations at Charles River Laboratories,
Inc. (including small research animals, bioprocessing and ovum-derived vaccine
products), those used for the manufacture and sale of rigid gas permeable
contact lens materials and lens care solutions at Polymer Technology
Corporation, cash and cash equivalents, a long-term note guaranteed by the
Company and certain floating rate demand notes due from certain of the Company's
subsidiaries. At December 30, 1995 and at December 31, 1994, the Company had
$495,159,000 and $470,900,000 of borrowings from the Partnership, respectively,
which were used to reduce U.S. short-term borrowings. For financial reporting
purposes, the assets, liabilities and earnings of the Partnership entities have
continued to be included in the Company's consolidated financial statements. The
outside investor's limited partnership interest in the Partnership has been
recorded as minority interest.
Note 13
---
SHAREHOLDERS'
EQUITY
At December 30, 1995, 10,000 shares of 4% Cumulative Preferred stock, 25,000,000
shares of Class A Preferred stock, 15,000,000 shares of Class B stock and
200,000,000 shares of Common stock were authorized. The Company issues treasury
shares to fulfill its obligations under its stock option plans. The difference
between the cost of treasury shares issued and the option price is charged to
capital in excess of par value.
Changes in shareholders' equity accounts are summarized below:
<TABLE>
<CAPTION>
Common And Class B Capital In Cumulative Treasury
------------------ Excess Of Translation --------- Unearned
Amounts In Thousands Shares Amount Par Value Adjustment Shares Amount Compensation
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 26, 1992 61,090 $24,150 $89,088 $63,465 (1,646) $(63,563) $ --
Shares issued under stock option plans
and restricted stock awards 45 4 (987) -- 217 8,648 --
Repurchase of Common and Class B stock -- -- -- -- (587) (28,753) --
Foreign currency translation adjustment -- -- -- (54,550) -- -- --
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 25, 1993 61,135 24,154 88,101 8,915 (2,016) (83,668) --
Shares issued under stock option plans
and restricted stock awards 136 11 5,748 -- 298 9,980 --
Repurchase of Common and Class B stock -- -- -- -- (561) (20,581) --
Stock issued under restricted Common
stock purchase plans -- -- -- -- -- -- (3,212)
Foreign currency translation adjustment -- -- -- 38,694 -- -- --
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 61,271 24,165 93,849 47,609 (2,279) (94,269) (3,212)
Shares issued under stock option plans
and restricted stock awards 196 15 13,939 -- 298 9,681 --
Repurchase of Common and Class B stock -- -- -- -- (2,545) (94,142) --
Stock issued under restricted Common
stock purchase plans -- -- -- -- -- -- (10,267)
Amortization of unearned compensation -- -- -- -- -- -- 4,324
Foreign currency translation adjustment -- -- -- 37,513 -- -- --
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at December 30, 1995 61,467 $24,180 $107,788 $85,122 (4,526) $(178,730) $(9,155)
=================================================================================================================================
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries 59
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
The cumulative translation adjustment included the effects of
translating assets and liabilities of certain non-U.S. subsidiaries at current
exchange rates. Translation adjustments relating to non-U.S. subsidiaries in
countries with highly inflationary economies were included in earnings.
Since 1987, the board of directors has authorized the repurchase, at
management's discretion, up to a total of 8,000,000 of the Company's issued
shares of Common stock. At December 30, 1995, 1,836,200 shares may be
repurchased under the terms of the authorization.
Unearned compensation relates to awards of restricted stock under the
1990 Stock Incentive Plan. Unearned compensation is recorded at the date of such
awards based on the market value of the shares and is expensed as performance
goals are met over the vesting period.
In 1988, the Company's board of directors approved the adoption of a
shareholder rights plan, in which preferred share purchase rights were
distributed as a dividend at the rate of one right for each outstanding share of
the Company's Common and Class B stock. Common and Class B shares issued
subsequent to the adoption of the rights plan automatically have preferred share
purchase rights attached to them. Under certain circumstances each right
entitles shareholders to purchase one two-hundredth of a share of Series A
Preferred stock, par value $1.00 per share. The rights may become exercisable
under certain circumstances involving actual or potential acquisitions of 20% or
more of the outstanding Common and Class B stock by a person or group. The board
of directors may substitute common stock equivalent preferred shares for Common
shares for the exercise of stock purchase rights. Until the rights become
exercisable, they have no dilutive effect on earnings per Common share.
The rights, which are non-voting, expire on July 1, 1998, and may be
redeemed by the Company at a price of $0.005 per right at any time prior to the
acquisition by a person or group of 20% of the outstanding shares of the
Company's Common and Class B stock. In the event a person or group has acquired
20%, but not more than 50%, of such shares, the Company may redeem the rights of
each holder, other than the acquirer, in exchange for either one share of Common
stock or one two-hundredth of a share of Series A Preferred stock.
Under the 1975, 1982, 1987 and 1990 stock option plans approved by the
shareholders, Class B stock has been authorized for issuance to employees. Class
B stock, which is used only in connection with the plans, has the same voting,
dividend and liquidation rights as Common stock. Options granted under the 1975
plan expire either five years (qualified) or ten years (nonqualified) from the
date of grant. All options granted under the 1982, 1987 and 1990 stock incentive
plans expire ten years from the date of grant. The following table summarizes
data for the Company's stock option plans:
<TABLE>
<CAPTION>
1995 1994 1993
- - --------------------------------------------------------------------------------------------------------------------------------
Number Of Option Price Number Of Option Price Number Of Option Price
Shares Per Share Shares Per Share Shares Per Share
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year 3,891,276 $15.59-$55.44 3,905,553 $9.84-$58.88 2,866,741 $9.84-$58.88
Options granted 1,181,585 $33.94-$42.19 432,485 $31.56-$39.25 1,332,265 $46.63-$52.00
Options exercised (207,184) $15.59-$42.69 (197,882) $9.84-$49.31 (236,757) $9.84-$52.94
Options canceled (440,078) $31.56-$55.44 (248,880) $13.28-$58.88 (56,696) $9.84-$55.44
================================================================================================================================
Shares under option at end of year 4,425,599 $16.97-$55.44 3,891,276 $15.59-$55.44 3,905,553 $9.84-$58.88
Total options exercisable
at end of year 2,661,110 $16.97-$55.44 2,529,108 $15.59-$55.44 2,038,238 $9.84-$58.88
================================================================================================================================
Shares available for future grants
at end of year 2,485,808 2,547,340 2,543,890
================================================================================================================================
</TABLE>
60 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
Under these plans, employees may borrow an amount equal to the purchase
price of shares secured by pledge agreements with the Company. Participants'
borrowings were $4,648,000 in 1995, $4,521,000 in 1994 and $3,483,000 in 1993.
Loans to officers and directors included in these borrowings were $3,149,000 in
1995, $3,746,000 in 1994 and $3,414,000 in 1993.
Note 14
---
FAIR VALUE OF
FINANCIAL
INSTRUMENTS
Financial instruments consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30, 1995 DECEMBER 31, 1994
- - ---------------------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Dollar Amounts In Thousands Value Value Value Value
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nonderivatives:
Cash and cash equivalents $ 193,814 $ 193,814 $ 230,369 $ 230,369
Short-term investments $ 803 $ 803 $ 2,173 $ 2,173
Other investments $ 561,232 $ 561,232 $ 425,000 $ 425,000
Notes payable $(284,510) $(284,510) $(252,783) $(252,783)
Long-term debt, including
current portion $(289,964) $(298,223) $(337,292) $(320,884)
- - ---------------------------------------------------------------------------------------------------------------------------
Derivatives held for purposes other than trading:
Foreign exchange instruments:
Other current assets $ 7,912 $ 18,176
Accrued liabilities (11,828) (8,622)
===========================================================================================================================
Net foreign exchange instruments $ (3,916) $ (400) $ 9,554 $ 18,605
===========================================================================================================================
Interest rate instruments:
Other current assets $ 10,236 $ 3,733
Accrued liabilities (10,671) (3,434)
- - ---------------------------------------------------------------------------------------------------------------------------
Net interest rate instruments $ (435) $ (13,556) $ 299 $ 3,612
===========================================================================================================================
</TABLE>
The carrying amount of cash, cash equivalents and short-term investments
approximates fair value because their maturity is generally less than one year
in duration. The Company places its cash, cash equivalents and short-term
investments with financial institutions and limits the amount of credit exposure
with any one financial institution to an amount between $25,000,000 and
$50,000,000, based on the credit rating and asset size of the institution. Fair
value of other investments was determined based on contract terms and an
evaluation of expected cash flows and investment risk. The carrying amount of
notes payable approximates fair value because their maturity is generally less
than three months in duration. Fair value for long-term debt was estimated using
either quoted market prices for the same or similar issues or the current rates
offered to the Company for debt with similar maturities. The fair value for
foreign exchange and interest rate instruments was determined based upon a model
which estimates the fair value of these items using market rates at year-end or
was based upon quoted market prices for similar instruments with similar
maturities.
Note 15
---
DERIVATIVE
FINANCIAL
INSTRUMENTS
Foreign Exchange Risk Management The Company enters into foreign exchange
forward and purchased option contracts to hedge foreign currency transactions,
firm commitments for the purchase of inventory and equity investments in
subsidiaries on a continuing basis for periods consistent with the committed
exposures. These hedge instruments are classified as held for purposes other
than trading. Gains and losses on the contracts offset losses and gains on the
exposures being hedged. The deferred gains and losses are expected to be
recognized within one year and have been recorded as other current assets or
accrued liabilities. Such amounts totaled less than $500,000 at December 30,
1995 and December 31, 1994. The Company typically leaves unhedged
Bausch & Lomb Incorporated and Consolidated Subsidiaries 61
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
foreign currency and transaction commitment exposures arising in countries with
hyperinflationary economies, restrictive exchange controls or undeveloped
currency markets because hedging such exposures is not cost effective. The
estimated notional amount of such exposures that remained unhedged at December
30, 1995 totaled $5,200,000.
Foreign exchange instruments served to hedge the following items:
Contractual Amounts At
DECEMBER 30, DECEMBER 31,
Dollar Amounts In Millions 1995 1994
- - ------------------------------------------------------------------------------
Assets and liabilities $ 775 $ 597
Firm purchase commitments 11 7
Equity investments in non-U.S. subsidiaries 453 399
- - ------------------------------------------------------------------------------
$1,239 $1,003
==============================================================================
Net gains or losses from foreign currency include the amortization of
premiums or discounts on the foreign exchange instruments over the contractual
term. Amortization of such amounts resulted in income of approximately $673,000
and $13,000,000 for the years ended December 30, 1995 and December 31, 1994
respectively. These amounts relate primarily to Irish pound contracts and result
from interest rate differentials in the countries of the currencies being
traded. 1995 results reflect the combined impact of rising U.S. interest rates
and declining interest rates in Ireland. The Company estimates that a 50 basis
point net move in either U.S. or Irish interest rates would have impacted
annualized pre-tax income in 1995 by approximately $2,800,000.
At December 30, 1995 and December 31, 1994, the Company had entered into
forward exchange and option contracts requiring it to buy $989,000,000 and
$811,000,000 U.S. dollar equivalent foreign currencies, respectively, primarily
Irish pounds, Singapore dollars and Swiss francs, and to sell $250,000,000 and
$192,000,000 U.S. dollar equivalent foreign currencies, respectively, primarily
Singapore dollars and German marks. The forward exchange instruments have
varying maturities with none exceeding twenty-four months. The Company generally
makes net settlements for such contracts at maturity, based on rates agreed to
at the contracts' inception.
Carrying value as presented in the table in Note 14 -- Fair Value Of
Financial Instruments does not reflect unrecognized net premium income totaling
$766,000 in 1995 and $957,000 in 1994. After including these amounts,
outstanding foreign exchange contracts were in a net unrealized negative cash
flow position of approximately $3,216,000 at December 30, 1995 and a net
unrealized positive cash flow position of approximately $10,511,000 at December
31, 1994. This net cash flow position is highly sensitive to changes in foreign
exchange rates. The Company estimates that for each $0.10 move in the U.S.
dollar to Irish pound exchange rate, the annualized cash flow impact for 1995
would have been approximately $35,000,000. The Company staggers the maturities
of the forward exchange and option contracts to mitigate the impact of contract
settlements on cash flow in any given period. The periodic cash inflows or
outflows from maturing or terminated forward exchange and option contracts
impact the Company's short-term debt position, but are not of sufficient
magnitude to adversely impact the Company's ability to adequately fund
operations or other business opportunities.
Interest Rate Risk Management The Company uses interest rate swap agreements to
balance its floating rate assets and floating rate liabilities. The swap
agreements are classified as held for purposes other than trading. Net payments
or receipts under the agreements are accrued and recorded as adjustments to
interest expense.
As of December 30, 1995 and December 31, 1994, the Company had swap
agreements outstanding with an aggregate notional amount of $941,397,000 and
$815,000,000, respectively. Of this amount, $380,000,000 is associated with
distributions from Wilmington Partners L.P., $170,000,000 is associated with
long-term debt placed by the Company, $200,000,000 is associated
62 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
with short-term debt, $65,000,000 is associated with a seven-year variable rate
lease commitment for an office facility, and $126,397,000 is associated with NLG
investments by Bausch & Lomb Ireland. The following is a summary of the
Company's interest rate swap agreements by major type:
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 31, Maturities
Dollar Amounts In Millions 1995 1994 Through
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Receive fixed swaps-notional amount $550 $550 2003
Average receive rate 5.60 - 6.58% 5.60 - 6.58%
Average pay rate 5.69 - 5.84% 5.98 - 6.50%
Pay fixed swaps-notional amount $265 $265 2002
Average pay rate 6.48 - 7.25% 6.48 - 7.25%
Average receive rate 5.63 - 5.84% delayed start
Floating/floating swap-notional amount $126 -- 2000
Pay rate (NLG) 3.45% --
Receive rate (USD) 5.47% --
===================================================================================================
</TABLE>
The variable rate portions of the swaps are based on either three-month
LIBOR or the one-month U.S. composite commercial paper rate. Disclosure of the
variable rate feature in the above table was based upon current interest rates
at December 30, 1995 and December 31, 1994. Changes in LIBOR or commercial paper
rates could change the disclosures and future cash flows.
Under the swap agreement associated with equity distributions from
Wilmington Partners L.P., the Company receives a fixed rate of 6.58% and pays a
variable three-month LIBOR rate. Upon early termination of the swap, no breakage
payment would be due to either party. The swap agreement is classified as held
for purposes other than trading, and is marked-to-market. Periodic settlements
under the agreement were accrued and recorded as adjustments to interest expense
and investment income in 1995 and 1994, respectively.
As of December 30, 1995, the Company had outstanding an interest rate
cap with a notional amount of NLG 15,465,000 which protects the Company from its
exposures to rising NLG interest rates. At December 31, 1994, the Company
further had an interest rate cap associated with the Company's lease obligation
for an office facility which had a notional amount of $65,000,000.
The notional amounts of foreign exchange and interest rate instruments
summarized above generally do not represent amounts exchanged by the parties and
thus are not a measure of exposure through the use of these instruments. The
amounts exchanged are based on the notional amounts and other terms which relate
to interest or exchange rates.
The Company is exposed to credit-related losses in the event of
non-performance by counterparties to the financial instruments, but it does not
expect any counterparties to fail to meet their obligations given their high
credit ratings. The Company has established quality standards for the financial
institutions with which it deals, basing such standards on the evaluation of a
recognized rating agency specializing in the rating of financial institutions.
Further, the Company actively monitors the concentration of business activity
with each financial institution in order to adequately diversify this credit
risk. Assuming non-delivery by all counterparties on all instruments, the
maximum credit exposure associated with interest rate and foreign exchange
instruments as of December 30, 1995 was $10,236,000 and $7,912,000,
respectively.
Note 16
---
LITIGATION
In June 1994, five separate shareholder actions against the Company and its
former Chief Executive Officer and Chairman, Daniel Gill, were filed in the
Western and Southern Districts of New York and an additional action, naming the
Company, Mr. Gill and four other officers was filed in January 1995, alleging
that the Company artificially inflated the value of its stock by making false
and misleading statements about expected financial results. In September 1995,
the parties
Bausch & Lomb Incorporated and Consolidated Subsidiaries 63
<PAGE>
Notes To Financial Statements
- - --------------------------------------------------------------------------------
agreed to consolidate the actions and plaintiffs have filed several
amended complaints. Plaintiffs seek to represent two classes, including all
persons who purchased stock during a nine-month period prior to a June 3, 1994
announcement that the Company was undertaking efforts to rebalance distributor
inventories and shareholders who purchased shares between June 4, 1994 and
January 25, 1995. The Company is vigorously defending itself against these
claims.
On December 28, 1994, following an article in Business Week magazine
questioning the Company's accounting treatment of a fourth quarter 1993 sales
program initiated by the Contact Lens Division, the Company received a request
from the Securities and Exchange Commission (SEC) for information in connection
with an inquiry being conducted by the SEC. Since then, the Company has received
additional requests for information from the SEC staff, including those with
respect to the Company's global eyewear business. The Company has provided
documents and Company personnel have testified. The Company is cooperating with
the SEC's continuing investigation and is unable to predict the outcome of this
proceeding.
In November 1994, the United States District Court for the Northern
District of Alabama certified a nationwide class of purchasers of Optima FW and
Medalist lenses during the period January 1, 1991 through November 1, 1994 to
pursue claims relating to the Company's marketing and sale of the Optima FW,
Medalist and SeeQuence 2 contact lens systems. Plaintiffs allege that the
Company misled consumers by packaging the same lens under three different names
for three different prices. Plaintiffs seek compensatory and punitive damages in
an unspecified amount. Another action raising substantially similar claims and
filed in California state court in October 1994 has been stayed pending the
trial of this action. The Attorney General for the State of Florida has served a
subpoena seeking documents relating to the marketing and sale of contact lenses
and contact lens solutions. Management continues to vigorously defend the
marketing of these lens systems.
In May and June 1995, the Company was served with several proposed class
action complaints in New York, New Jersey, Pennsylvania and California, alleging
that the Company misled consumers in its marketing and sale of Sensitive Eyes
Rewetting Drops and Saline Solution and Bausch & Lomb Eyewash. The Company
stipulated to certification of a nationwide class of purchasers of Sensitive
Eyes Rewetting Drops, Boston Rewetting Drops, ReNu Rewetting Drops and Bausch &
Lomb Eyewash between May 1, 1989 and June 30, 1995 in the New York action. In
exchange, plaintiffs agreed to seek dismissal of their actions in other states.
Another action, which was filed by a separate group of plaintiffs' attorneys in
state court in California, was stayed by the court pending further review.
Management vigorously defends the marketing of these products.
In June 1994, the Florida Attorney General, acting on behalf of
disposable contact lens consumers in the State of Florida, filed an antitrust
action against the Company and others in the United States District Court for
the Middle District of Florida. The complaint challenges the Company's
long-standing policy of selling contact lenses only to licensed professionals.
Plaintiffs allege that the policy was adopted in conspiracy with others to
eliminate alternative channels of trade from the disposable lens market. The
Florida Attorney General seeks treble damages on behalf of all purchasers of
contact lenses, whether from the Company or others, a $1,000,000 penalty and
injunctive relief. A number of consumer class actions have been consolidated in
the Middle District of Florida and actions are pending in California, Alabama
and Tennessee state courts. The complaints make similar allegations and seek
similar relief on behalf of consumers outside the State of Florida. The Company
defends its policy as a lawfully adopted means of insuring effective
distribution of its products and safeguarding consumers' health.
In 1995, the Company established additional provisions for, among other
things, the costs and expenses associated with certain litigation against the
Company. One of the matters related to litigation arising from the marketing and
sale of Miracle-Ear hearing aids manufactured and sold by the Company's Dahlberg
Inc. subsidiary between January 1989 and January 1994. In November 1995,
settlements of class actions in Minnesota and Alabama and an action by the FTC
were approved. The provision balance is deemed adequate to satisfy the
settlements in these matters, as well as the costs and expenses reasonably
estimable with regard to the other pending matters.
64 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
REPORT OF
INDEPENDENT
ACCOUNTANTS
To the Shareholders and Board of Directors of Bausch & Lomb Incorporated
In our opinion, the accompanying consolidated financial statements appearing on
pages 43 through 64 of this 1995 annual report of Bausch & Lomb Incorporated
present fairly, in all material respects, the financial position of Bausch &
Lomb Incorporated and its subsidiaries at December 30, 1995 and December 31,
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 30, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Rochester, New York
January 23, 1996
except as to the last paragraph of Note 8 -
Provision For Income Taxes which is as of February
15, 1996
- - --------------------------------------------------------------------------------
REPORT OF
GOVERNANCE
To Bausch & Lomb Shareholders
The board of directors adopted a set of governing principles in mid-1994
establishing how the board is to fulfill its role in overseeing the affairs of
the Company.
These principles include the following procedures:
The board, through its committee on directors, regularly reviews the size of the
board, the mix of inside and outside directors (the majority are to be outside
directors), the selection of new candidates for membership, and sets the
compensation of board members. Additionally, there is a process for the
evaluation of the overall effectiveness of the board as a whole and board
members are also asked to evaluate their performance as directors.
The board formally evaluates the performance of the Chief Executive Officer and
receives a report from management on succession planning and management
development, all on an annual basis.
Outside directors meet in executive session without members of management once
each year.
These and other principles are reviewed on a regular basis to assure
their relevance to the needs of the Company and the interests of shareholders.
Bausch & Lomb Incorporated and Consolidated Subsidiaries 65
<PAGE>
Selected Financial Data
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Dollar Amounts In Millions - Except Per Share Data 1995 1994* 1993*
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
Net sales $1,932.9 $1,892.7 $1,830.1
Earnings from continuing operations before cumulative
effect of change in accounting principle 112.0 31.1 138.9
Cumulative effect of change in accounting principle -- -- --
Net earnings 112.0 31.1 138.9
Earnings from continuing operations before cumulative
effect of change in accounting principle and non-recurring charges** 108.6 106.1 175.4
Average shares outstanding (000s) 57,852 59,739 60,115
- - --------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Earnings from continuing operations before cumulative
effect of change in accounting principle $ 1.94 $ 0.52 $ 2.31
Cumulative effect of change in accounting principle -- -- --
Net earnings 1.94 0.52 2.31
Earnings from continuing operations before cumulative
effect of change in accounting principle and non-recurring charges** 1.88 1.78 2.92
Shareholders' equity 16.32 15.50 15.38
Dividends 1.01 0.955 0.88
- - --------------------------------------------------------------------------------------------------------------------------
AT YEAR END
Working capital $ 70.9 $ 277.4 $ 669.6
Property, plant and equipment 550.4 542.8 541.1
Total assets 2,550.1 2,457.7 2,493.0
Short-term debt 383.5 300.6 244.6
Long-term debt 191.0 289.5 321.0
Shareholders' equity 929.3 914.4 909.2
- - --------------------------------------------------------------------------------------------------------------------------
STATISTICS
Before Cumulative Effect Of Change In Accounting Principle:
Return on sales 5.8% 1.6% 7.6%
Return on average shareholders' equity 11.9% 3.2% 15.5%
Return on average total assets 4.5% 1.2% 6.8%
Before Cumulative Effect Of Change In Accounting Principle
And Non-recurring Charges**:
Return on sales 5.6% 5.6% 9.6%
Return on average shareholders' equity 11.5% 11.0% 19.5%
Return on average total assets 4.3% 4.1% 8.6%
Average income tax rate 36.9% 52.6% 33.5%
Current ratio 1.1 1.4 1.9
Total debt to shareholders' equity 61.8% 64.5% 62.2%
Total debt to capital 38.2% 39.2% 38.3%
Capital expenditures $ 95.5 $ 84.8 $ 107.2
Employees 14,000 14,400 15,900
Common shareholders of record 8,100 9,100 8,100
===========================================================================================================================
</TABLE>
*Amounts have been restated for certain items as more fully described in Note 2
-- Restatement Of Financial Information.
**Non-recurring charges include restructuring charges, gains on divestiture of
businesses and goodwill impairment charges.
66 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986 1985
- - -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$1,709.1 $1,520.1 $1,368.6 $1,220.3 $978.3 $840.3 $698.9 $596.2
171.4 85.9 131.4 114.4 97.9 85.3 74.7 66.8
-- (58.3) -- -- -- -- -- --
171.4 27.6 131.4 114.4 97.9 85.3 74.7 66.8
171.4 149.2 131.4 114.4 97.9 85.3 74.7 66.8
60,399 60,455 60,150 60,435 59,894 60,758 60,578 59,922
- - -------------------------------------------------------------------------------------------------------------------------
$ 2.84 $ 1.42 $ 2.19 $ 1.89 $ 1.63 $ 1.40 $ 1.23 $ 1.11
-- (0.96) -- -- -- -- -- --
2.84 0.46 2.19 1.89 1.63 1.40 1.23 1.11
2.84 2.47 2.19 1.89 1.63 1.40 1.23 1.11
15.11 13.77 13.95 11.96 10.55 9.70 8.16 6.84
0.80 0.72 0.66 0.58 0.50 0.43 0.39 0.39
- - -------------------------------------------------------------------------------------------------------------------------
$ 514.9 $ 405.3 $ 341.9 $ 316.3 $ 217.3 $ 372.4 $ 348.5 $ 260.0
503.9 457.9 418.8 351.0 294.3 226.5 205.6 150.9
1,873.7 1,738.5 1,677.4 1,429.2 1,212.6 978.7 885.7 627.3
208.9 256.1 285.2 228.2 184.7 18.6 22.1 21.4
277.7 195.7 214.5 219.1 152.5 160.5 206.9 81.3
898.2 819.3 825.5 713.3 629.0 576.6 490.8 408.1
- - -------------------------------------------------------------------------------------------------------------------------
10.0% 5.7% 9.6% 9.4% 10.0% 10.2% 10.7% 11.2%
20.3% 10.3% 17.2% 17.5% 16.6% 15.9% 16.6% 18.7%
9.5% 5.0% 8.5% 8.7% 8.9% 9.2% 9.9% 11.2%
10.0% 9.8% 9.6% 9.4% 10.0% 10.2% 10.7% 11.2%
20.3% 17.7% 17.2% 17.5% 16.6% 15.9% 16.6% 18.7%
9.5% 8.7% 8.5% 8.7% 8.9% 9.2% 9.9% 11.2%
32.4% 39.7% 32.6% 32.6% 33.3% 36.8% 33.8% 33.8%
1.9 1.7 1.6 1.7 1.6 3.1 3.1 3.2
54.2% 55.1% 60.5% 62.7% 53.6% 31.1% 46.7% 25.2%
35.1% 35.5% 37.7% 38.5% 34.9% 23.7% 31.8% 20.1%
$ 119.3 $ 88.6 $ 108.4 $ 100.3 $ 103.1 $ 49.4 $ 50.3 $ 34.1
14,500 13,700 13,000 12,500 10,000 8,300 8,000 7,600
7,700 8,400 6,900 6,700 7,100 6,200 6,300 6,500
=========================================================================================================================
</TABLE>
Bausch & Lomb Incorporated and Consolidated Subsidiaries 67
<PAGE>
Divisions And Subsidiaries
- - --------------------------------------------------------------------------------
The
Americas
---
United States
Arnette Optic Illusions, Inc.
San Clemente, California (2)
Bausch & Lomb
Lamex, Inc.
Miami, Florida (2)
Bausch & Lomb
Oral Care Division
Rochester, New York (2)
Bausch & Lomb Pharmaceutical
Division
Tampa, Florida (1)
Charles River Laboratories, Inc.
Hollister, California (1)
Summerland Key, Florida (1)
Windham, Maine (1)
Wilmington, Massachusetts (1)
Portage, Michigan (1)
O'Fallon, Missouri (1)
Omaha, Nebraska (1)
Pittsfield, New Hampshire (1)
Newfield, New Jersey (1)
Stone Ridge, New York (1)
Raleigh, North Carolina (1)
Charleston, South Carolina (1)
Oregon, Wisconsin (1)
Contact Lens Division
Rochester, New York (1)
Sarasota, Florida (1)
Lynchburg, Virginia (1)
East Acres Biologicals
Southbridge, Massachusetts (1)
Eyewear Division
Oakland, Maryland (1)
Rochester, New York (1)
San Antonio, Texas (1)
Dahlberg, Inc.
Golden Valley, Minnesota (1)
Outlook Eyewear Company
Broomfield, Colorado (1)
Personal Products Division
Rochester, New York (1)
Greenville, South Carolina (1)
Polymer Technology Corporation
Wilmington, Massachusetts (1)
Revo, Inc.
Sunnyvale, California (1)
SPAFAS
Preston, Connecticut (1)
Storrs, Connecticut (1)
Gainsville, Georgia (1)
Roanoke, Illinois (1)
Reinholds, Pennsylvania (1)
Steri-Oss, Inc.
Yorba Linda, California (1)
Thin Film Technology
Division
Rochester, New York (1)
Wilmington Partners, L.P.
Wilmington, Massachusetts
Canada
Bausch & Lomb Canada, Inc.
Toronto, Ontario (2)
Montreal, Quebec (2)
Charles River Canada, Inc.
St. Constant, Quebec (1)
Latin
America &
Caribbean
Basin
---
Bermuda
Bausch & Lomb (Bermuda) Limited
Hamilton
Brazil
BL Industria Otica, Ltda.
Rio de Janeiro (2)
Cornealent Waicon do Brasil
Industria e Comercio, Ltda
Porto Allegre (1)
Rio de Janeiro (2)
Colombia
Bausch & Lomb de Colombia S.A.
Bogota (2)
Mexico
Operadoro de Contactologia
S.A. de C.V.
Mexico City (1)
Puerto Rico
Bausch & Lomb Puerto Rico, Inc.
San Juan (2)
Venezuela
Bausch & Lomb Venezuela, C.A.
Caracas (2)
68 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
- - --------------------------------------------------------------------------------
Europe
---
Austria
Bausch & Lomb G.m.b.H.
Vienna (2)
Denmark
Bausch & Lomb Danmark A/S
Copenhagen (2)
Finland
OY Bausch & Lomb Finland A.B.
Helsinki (2)
France
Bausch & Lomb France S.A.
Le Mesnil St. Denis (2)
Charles River France S.A.
Lyons (1)
St. Aubin-les-Elbeuf (1)
Iffa Credo S.A.
L' Arbresle Cedex (1)
Germany
Charles River WIGA G.m.b.H.
Extertal Bosingfeld (1)
Kisslegg (1)
Sulzfeld (1)
Dr. Gerhard Mann,
Chem.-Pharm.Fabrik G.m.b.H.
Berlin (1)
Great Britain
Europe, Middle East & Africa Division
London (2)
Bausch & Lomb U.K., Ltd.
London (2)
Charles River U.K., Ltd.
Margate (1)
Madden & Layman Limited
St. Leonards-on-Sea (1)
Greece
Bausch & Lomb International, Inc.
Athens (2)
Italy
Bausch & Lomb-IOM S.p.A.
Milan (1)
Rome (2)
Charles River Italia S.p.A.
Calco (1)
Netherlands
Bausch & Lomb B.V.
Heemstede (2)
Bausch & Lomb Holdings B.V.
Norway
Bausch & Lomb Norway A/S
Oslo (2)
Portugal
Bausch & Lomb Espana S.A.
Lisbon (2)
Republic Of Ireland
Bausch & Lomb Ireland
Waterford (1)
Scotland
Award, plc
Livingston (1)
Spain
Bausch & Lomb Espana S.A.
Barcelona (1)
Madrid (2)
Criffa, S.A.
Barcelona (1)
Sweden
Bausch & Lomb Svenska A.B.
Stockholm (2)
Switzerland
Bausch & Lomb A.G.
Bern (2)
Bausch & Lomb Distops S.A.
Geneva (2)
Bausch & Lomb Fribourg S.A.
Fribourg
Bausch & Lomb Finance
Lausanne
Turkey
Bausch & Lomb Saglik ve Optik
Urunleri Tic.A.S.
Istanbul (2)
Asia & Pacific
---
Australia
Bausch & Lomb (Australia) Pty. Ltd.
Sydney (2)
Hong Kong
Asia-Pacific Division (2)
Bausch & Lomb (Hong Kong) Ltd. (1)
Bausch & Lomb-Lord Company
(Hong Kong) Ltd. (2)
India
Bausch & Lomb India Limited
New Delhi (1)
Japan
B.L.J. Company Ltd.
Toyko (2)
Charles River Japan, Inc.
Atsugi (1)
Hino (1)
Tskuba (1)
Yokohama (2)
Malaysia
Bausch & Lomb (Malaysia) Sdn. Bhd.
West Malaysia (2)
New Zealand
Bausch & Lomb (New Zealand) Limited
Auckland (2)
People's Republic Of China
Bausch & Lomb China, Inc.
Beijing (1)
Guangzhou (1)
Philippines
Bausch & Lomb Asia-Pacific Division
Manila (2)
Republic Of China
Bausch & Lomb Taiwan Limited
Taipei, Taiwan (1)
Singapore
Bausch & Lomb (Sinagpore) Private Limited (2)
Bausch & Lomb Far East, P.T.E
South Korea
Bausch & Lomb Korea, Ltd.
Seoul (1)
(1) Manufacturing and Production
(2) Direct Marketing and Sales
Bausch & Lomb Incorporated and Consolidated Subsidiaries 69
<PAGE>
Directors And Officers
- - --------------------------------------------------------------------------------
Board of
Directors
---
William H. Waltrip (1)
Chairman and
Chief Executive Officer
Bausch & Lomb
Director since 1985
Franklin E. Agnew (1) (3)
Business Consultant
Pittsburgh, Pennsylvania
Director since 1982
William Balderston III (1) (4)
Executive Vice President
(Retired)
The Chase Manhattan Bank
Rochester, New York
Director since: 1989
Bradford R. Boss (3)
Chairman of the Board
A.T. Cross Company
(a manufacturer of
writing instruments)
Lincoln, Rhode Island
Director since: 1986
Jay T. Holmes (1)
Executive Vice President
and Chief Administrative Officer
Bausch & Lomb
Director since: 1986
Ruth R. McMullin (3)
Management Fellow
Yale School of Management
New York, New York
Director since: 1987
John R. Purcell (1) (4)
Chairman and
Chief Executive Officer
Grenadier Associates, Ltd.
(a venture banking firm)
Juno Beach, Florida
Director since: 1976
Linda Johnson Rice (2)
President and
Chief Operating Officer
Johnson Publishing Company, Inc.
Chicago, Illinois
Director since: 1990
Alvin W. Trivelpiece, Ph.D. (2) (4)
Director
Oak Ridge National Laboratory
and President
Lockheed Martin
Energy Research Corporation
(a science and energy research
laboratory)
Oak Ridge, Tennessee
Director since: 1989
Kenneth L. Wolfe (2)
Chairman of the Board
and Chief Executive Officer
Hershey Foods Corporation
(a food products manufacturing
company)
Hershey, Pennsylvania
Director since: 1989
Committee Memberships:
(1) Executive Committee
(2) Audit Committee
(3) Committee on Management
(4) Committee on Directors
<PAGE>
Officers
---
William H. Waltrip
Chairman and Chief Executive Officer
3 months of service with the Company
William M. Carpenter
President and Chief Operating Officer
1 year of service with the Company
Jay T. Holmes
Executive Vice President and Chief Administrative Officer
15 years of service with the Company
Senior Vice Presidents:
Henry L. Foster, D.V.M.
Charles River Laboratories, Inc.
12 years of service with the Company
James C. Foster
Charles River Laboratories, Inc.
12 years of service with the Company
Stephen A. Hellrung
Secretary and General Counsel
14 years of service with the Company
James E. Kanaley
Personal Products Division and Global Business Manager Lens Care Products
18 years of service with the Company
Alex Kumar
International Operations
10 years of service with the Company
Stephen C. McCluski
Finance
8 years of service with the Company
Thomas M. Riedhammer, Ph.D.
Worldwide Pharmaceutical, Surgical and Hearing Care Products
14 years of service with the Company
Carl E. Sassano
Contact Lens Division and Global Business Manager
Contact Lens Products
23 years of service with the Company
Deborah K. Smith
Human Resources
1 year of service with the Company
Vice Presidents:
Alan P. Dozier
U.S. Pharmaceuticals
11 years of service with the Company
Dwain L. Hahs
Europe, Middle East & Africa Division
19 years of service with the Company
James T. Horn
Asia-Pacific Division
4 years of service with the Company
Franklin T. Jepson
Communications and
Investor Relations
17 years of service with the Company
Barbara M. Kelley
Public Affairs
13 years of service with the Company
Jurij Z. Kushner
Controller
15 years of service with the Company
James F. Milton
Japan
25 years of service with the Company
W. Jeff Pontius
Eyewear Division
1 year of service with the Company
Alan H. Resnick
Treasurer
23 years of service with the Company
Robert F. Thompson
Polymer Technology Corporation
13 years of service with the Company
James J. Ward
Audit Services
19 years of service with the Company
Assistant Secretary:
Jean F. Geisel
20 years of service with the Company
70 Bausch & Lomb Incorporated and Consolidated Subsidiaries
<PAGE>
[Back cover]
Bausch & Lomb
One Bausch & Lomb Place
Rochester, New York 14604
Telephone:
(716) 338-6000
(800) 344-8815
Bausch & Lomb 1995 Annual Report
Printed in U.S.A.
M-1918-95
<PAGE>
[Front Cover]
Our 1995 Annual Report
*****
OUR VALUES AND OUR VISION
BAUSCH
& LOMB
Healthcare and Optics
Worldwide
<PAGE>
[Inside Front cover]
Bausch & Lomb In Brief
Business Segment Revenues
Bausch & Lomb competes
in selected segments of global
healthcare and optical markets where
it is advantaged with
superior technology, low production
costs and widely recognized brand
names.
From Continuing Product Lines
HEALTHCARE 71%
OPTICS 29%
Business Segment Earnings
Before Restructuring
From Continuing Product Lines
HEALTHCARE 80%
OPTICS 20%
THE HEALTHCARE SEGMENT
The Healthcare Segment consists of three strategic sectors.
Personal Health Sector
The Personal Health Sector is comprised of branded products purchased by
consumers in health and beauty aid sections of pharmacies, food stores and mass
merchandise outlets. They include contact lens care solutions; oral care, eye
care and skin care products; and non-prescription medications.
Medical Sector
The Medical Sector consists of contact lenses, ophthalmic pharmaceuticals,
hearing aids and dental implants sold to healthcare professionals who in turn
dispense them to consumers.
Biomedical Sector
The Biomedical Sector is made up of products and services used in the research
and development of pharmaceuticals and the production of genetically engineered
materials. These include purpose-bred research animals, bioprocessing services
and products derived from specific pathogen- free eggs.
THE OPTICS SEGMENT
The Optics Segment consists primarily of premium-priced sunglasses sold under
such internationally recognized brand names as Ray-Ban, Arnette, Revo and Liz
Claiborne.
BAUSCH & LOMB WORLDWIDE
Indicative of Bausch & Lomb's worldwide span, regions outside the U.S. represent
49% of corporate revenues. Manufacturing or marketing organizations have been
established in approximately 35 countries, and the Company's products are
distributed in more than 70 other nations. Bausch & Lomb has approximately
14,000 employees and is headquartered in Rochester, New York.
Sector Information
Percent Of Total Sales From Continuing Product Lines
PERSONAL HEALTH 36%
MEDICAL 25%
BIOMEDICAL 10%
OPTICS 29%
<PAGE>
[Inside Back Cover]
Corporate Information
Bausch & Lomb
One Bausch & Lomb Place
Rochester, New York 14604
Telephone:
(716) 338-6000
(800) 344-8815
Requests For Information:
Shareholders: In addition to its annual report, the Company makes available
copies of its proxy statement and its Form 10-K.
Quarterly Reports: In an effort to provide more timely information to all
shareholders, and as part of the Company's continuing efforts to reduce costs,
Bausch & Lomb mails quarterly news releases on financial results to investors
who have requested this information and makes them available by fax at (800)
356-0837. However, printed quarterly reports are not sent routinely to all
shareholders. If your shares are registered directly with the Company or in the
name of a broker or other nominee and you would like to receive quarterly
communications to shareholders, you may receive this information without charge
by written request to the Investor Relations Department at the address listed
above.
Security analysts and shareholders seeking information concerning Company
operations, shareholder programs or dividend policy may contact:
Investor Relations
Telephone (716) 338-6025
Bausch & Lomb conducts presentations throughout the year for institutional
investors and securities analysts. The following locations will be among those
where presentations are conducted in the near future: Boston, Chicago, London,
New York, Paris and San Francisco. For more information, contact the Investor
Relations department.
Shareholders seeking information regarding their individual accounts or
dividend payments may contact our stock transfer agent:
The First National Bank of Boston
Telephone (800) 730-4001
News Media: News media representatives and others seeking general information
should contact the Corporate Communications Department. Telephone (716) 338-8064
Annual Meeting Of Shareholders
Shareholders are invited to attend the Company's annual meeting which will be
held on Friday, May 10, 1996 at 10:30 a.m. The Meeting will be conducted in the
Grand Ballroom of the Hyatt Regency Hotel located at 125 East Main Street,
Rochester, New York.
Dividend Record And Payment Dates
Bausch & Lomb generally pays dividends on or about the first day of April, July,
October and January. Dividends will be paid to shareholders of record on March
10, 1996, June 1, 1996, September 1, 1996 and December 1, 1996.
Dividend Reinvestment And Stock Purchase Plan
The Dividend Reinvestment and Stock Purchase Plan is available to shareholders
of Bausch & Lomb Common stock, and is an efficient and economical method for
building investment in the Company. Under the plan, shareholders may have their
cash dividends automatically invested in additional shares of the Company's
Common stock. Shareholders may also elect to make cash contributions of up to
$60,000 per year to purchase additional Bausch & Lomb shares. All plan expenses,
including brokerage commissions and service charges, are paid by Bausch & Lomb.
Shareholders desiring additional information on these services should contact:
The First National Bank of Boston
Shareholder Services
Mail Stop: 45-02-09
P.O. Box 644
Boston, MA 02102-0644
Registrar And Transfer Agent
The First National Bank of Boston
Transfer Processing
Mail Stop: 45-02-05
P.O. Box 644
Boston, MA 02102-0644
Stock Listing
The Common stock of the corporation is traded under the symbol BOL on the New
York Stock Exchange. Options on the Company's Common stock are traded on the
American Stock Exchange.
Trademarks:
The trademarks of Bausch & Lomb Incorporated and its subsidiary companies
referred to in this report are:
Activ, Arnette, Bausch & Lomb,
Betamann, Bio-Esthetic, Boston,
Boston 7, Boston Advance, Boston ES,
Boston Simplicity, Clear Choice, Crolom,
Curel, Dr. Mann Pharma, Endosafe, Envision,
Floxal, Gold Medalist, Interplak, Lotemax,
Marathon, Medalist, Medalist 66,
Miracle-Ear, Mirage, Moisture Drops,
Muro Ocugel, Occasions, Opcon-A,
Optima FW, OptiPranolol, Orbs, Predator,
Ray-Ban, ReNu, Revo, Revo Shapes,
Revo Travellers, SeeQuence 2,
Sensitive Eyes, Sidestreet, Silsoft,
Soft Sense, SofLens66, Steri-Oss, Tobrex,
Vividrin, Vivimed, Viviplus, Vivivit,
Vivivit Multi, Wayfarer, xrays
Killer Loop is a trademark of
Killer Loop S.p.A.
Liz Claiborne is a trademark of Liz Claiborne, Inc. U.S.A.
Design
Meyer Design Associates, Inc.
Wilton, CT
Major Photography
Ted Kawalerski
New York City
Product Photography
Ron Wu
Rochester, NY
(C) 1996 Bausch & Lomb Incorporated
All Rights Reserved Worldwide
50% Total Recovered Fiber
10% Post-Consumer Recycled Fiber
<PAGE>
[Back cover]
Bausch & Lomb
One Bausch & Lomb Place
Rochester, New York 14604
Telephone:
(716) 338-6000
(800) 344-8815
BAUSCH & LOMB 1995 ANNUAL REPORT
Printed in U.S.A.
M-1918-95
BAUSCH
& LOMB
Healthcare and Optics
Worldwide
EXHIBIT 22
<TABLE>
SUBSIDIARIES OF BAUSCH & LOMB INCORPORATED
As of December 30, 1995
<CAPTION>
Jurisdiction Under
Name Which Organized
<S> <C>
Bausch & Lomb AG Switzerland
Bausch & Lomb (Australia) Pty. Ltd. Australia
B.L.J. Company Ltd. Japan
Bausch & Lomb BV Netherlands
Bausch & Lomb (Bermuda) Limited Bermuda
Bausch & Lomb Bermuda Finance Limited Bermuda
Bausch & Lomb Canada, Inc. Canada
Charles River Laboratories, Inc. Delaware
BL Industria Otica, Ltda. Brazil
Bausch & Lomb China, Inc. Delaware
Bausch & Lomb Colombia, S.A. Colombia
Bausch & Lomb Danmark A/S Denmark
Bausch & Lomb Espana, S.A. Spain
Bausch & Lomb Finance S.A. Switzerland
Oy Bausch & Lomb Finland AB Finland
Bausch & Lomb Foundation, Inc. New York
Bausch & Lomb France, S.A. France
Bausch & Lomb Fribourg S.A. Switzerland
Bausch & Lomb GmbH Austria
Bausch & Lomb Holdings BV Netherlands
Bausch & Lomb (Hong Kong) Limited Hong Kong
Bausch & Lomb-Lord, Co. (Hong Kong) Limited Hong Kong
Bausch & Lomb (Ireland) Ireland
Bausch & Lomb India Limited India
Bausch & Lomb IOM/SpA Italy
Bausch & Lomb Korea, Inc. Korea
Bausch & Lomb Lamex, Inc. Delaware
Bausch & Lomb (Malaysia) Sdn. Bhd. Malaysia
Dr. Mann Pharma Germany
Dahlberg, Inc. Minnesota
Bausch & Lomb New Zealand, Ltd. New Zealand
Bausch & Lomb Norge A/S Norway
Operadora de Contactologia S.A. de C.V. Mexico
Outlook Eyewear Company Delaware
Bausch & Lomb Opticare, Inc. New York
Bausch & Lomb Oral Care Division, Inc. Georgia
Bausch & Lomb Pharmaceuticals, Inc. Delaware
Polymer Technology Corporation New York
Bausch & Lomb Puerto Rico, Inc. Puerto Rico
Bausch & Lomb Realty Corporation New York
Revo, Inc. Delaware
Bausch & Lomb (Singapore) Private Ltd. Singapore
Steri-Oss Inc. California
Bausch & Lomb Svenska AB Sweden
Bausch & Lomb Taiwan Limited Taiwan
Bausch & Lomb Turkey Turkey
Bausch & Lomb U.K. Limited England
Bausch & Lomb Venezuela C.A. Venezuela
Cornealent Waicon do Brasil Industria e
Comercio, Ltda. Brazil
Wilmington Partners L.P. Massachusetts
Windmill Investors Netherlands
</TABLE>
EXHIBIT (24)
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Bausch & Lomb Incorporated
Our audits of the consolidated financial statements referred
to in our report dated January 23, 1996, except as to the
last paragraph of Note 8 - Provision for Income Taxes which
is as of February 15, 1996, appearing on page 65 of the 1995
Annual Report to Shareholders of Bausch & Lomb Incorporated
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-
K) also included an audit of the Financial Statement
Schedule listed in Item 14(a)2 of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein
when read in conjunction with the related consolidated
financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Rochester, New York
January 23, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 2-56066, 2-85158,
33-15439 and 33-35667) and in the Prospectus constituting
part of the Registration Statement on Form S-3 (No. 33-
51117) of Bausch & Lomb Incorporated of our report dated
January 23, 1996, except as to the last paragraph of Note 8
- - - Provision for Income Taxes which is as of February 15,
1996, appearing on page 65 of the 1995 Annual Report to
Shareholders of Bausch & Lomb Incorporated which is
incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our above
report on the Financial Statement Schedule.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Rochester, New York
March 28, 1996
EXHIBIT (25)
POWER OF ATTORNEY
The undersigned directors of Bausch & Lomb Incorporated
(the "Company"), each hereby constitutes and appoints William
H. Waltrip and Jay T. Holmes, or either of them, his or her
respective true and lawful attorneys and agents, each with
full power and authority to act as such without the other,
to sign for and on behalf of the undersigned the Company's
Annual Report on Form 10-K for the year ended December 30,
1995, to be filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934
and the related rules and regulations thereunder, and any
amendment or amendments thereto, the undersigned hereby
ratifying and confirming all that said attorneys and agents,
or either one of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, this instrument has been executed
by the undersigned as of this 27th day of February, 1996.
/s/ Franklin E. Agnew /s/ John R. Purcell
Franklin E. Agnew John R. Purcell
/s/ William Balderston III /s/ Linda Johnson Rice
William Balderston III Linda Johnson Rice
/s/ Bradford R. Boss /s/ Alvin W. Trivelpiece
Bradford R. Boss Alvin W. Trivelpiece
/s/ Jay T. Holmes /s/ William H. Waltrip
Jay T. Holmes William H. Waltrip
/s/ Ruth R. McMullin /s/ Kenneth L. Wolfe
Ruth R. McMullin Kenneth L. Wolfe
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS QTR-4
<FISCAL-YEAR-END> DEC-30-1995 DEC-30-1995
<PERIOD-END> DEC-30-1995 DEC-30-1995
<CASH> 193,814 193,814
<SECURITIES> 803 803
<RECEIVABLES> 261,819 261,819
<ALLOWANCES> 11,232 11,232
<INVENTORY> 304,298 304,298
<CURRENT-ASSETS> 930,347 930,347
<PP&E> 1,082,750 1,082,750
<DEPRECIATION> (532,384) (532,384)
<TOTAL-ASSETS> 2,550,066 2,550,066
<CURRENT-LIABILITIES> 859,477 859,477
<BONDS> 190,974 190,974
<COMMON> 24,180 24,180
0 0
0 0
<OTHER-SE> 905,120 905,120
<TOTAL-LIABILITY-AND-EQUITY> 2,550,066 2,550,066
<SALES> 1,932,883 455,066
<TOTAL-REVENUES> 1,932,883 455,066
<CGS> 859,984 202,035
<TOTAL-COSTS> 859,984 202,035
<OTHER-EXPENSES> 862,254 239,913
<LOSS-PROVISION> 8,253 2,838
<INTEREST-EXPENSE> 45,765 10,766
<INCOME-PRETAX> 211,847<F1> <F1> 4,836
<INCOME-TAX> 78,068 2,324
<INCOME-CONTINUING> 112,022 (3,365)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 112,022 (3,365)
<EPS-PRIMARY> 1.94 (0.04)
<EPS-DILUTED> 1.94 (0.04)
<FN>
<F1>Income Before Taxes and Minority Interest
</FN>
</TABLE>
